Social media giant Facebook (NASDAQ:FB) is working hard on its own online payment model. The idea is to make it easier for Facebook users to purchase apps via mobile phones. Facebook is targeting users that have already made purchases on Facebook before. Their credit card details are therefore on file. These details are currently used when a FB-user wants to purchase credits and “gifts” for friends. Those users would soon be able to buy e.g., apps using just their Facebook login, eliminating the need to have to submit credit card information.
This payment option would streamline the current cumbersome payment process. Currently, FB-users paying from their smartphones often have problems submitting detailed information via the small screens or touchscreens of their devices.
Facebook is launching a pilot with one of its partners: JackTheads, a flash-sale shopping site for young men. Once Facebook will complete the pilot successfully, the Company will go into direct competition with PayPal (purchased by eBay), one of its partners.
Facebook representative Tera Randall went on record stating: “It does not involve moving the payment processing away from an app’s current payments provider, such as PayPal.” She went on to emphasize: “We continue to have a great relationship with PayPal, and this product is simply to test how we can help our app partners provide a more simple commerce experience.”
The online payment model offers Facebook several benefits:
- Analysts want FB to enter the e-commerce market which would translate into a higher share price.
- FB will garner important information about the purchase behavior of its users.
- Current users will keep on using FB for payment and not switch to e.g., PayPal.
- The payment method would appeal to gamers and geeks who purchase online.
- Companies such as JackTheads and Fab would benefit since they generate revenues from mobile phone purchases and their demographics overlap with those of FB.The model also has its critics, who especially voiced security concerns.