Facebook adds free peer-to-peer payments in Messenger

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This article is a crosspost with the Payfort blog.

If you’re like most people, you know settling debts or splitting bills between friends is rarely an easy task. Whether it’s an issue of breaking large notes or a friend that relies on plastic, there’s always someone left short changed. But now, a new product from the world’s largest social network is looking to make these pain points a thing of the past.

Last month Facebook unveiled a peer-to-peer payment service in the form of their widely used Messenger app. The new service, which allows users to quickly exchange money at no cost, is set to roll out across the United States in the coming months.


How does it work

Messenger’s payment service was design to operate in a simple and intuitive way. Users simply link their debit or credit card to their Facebook profile and they’re ready to start sending (or receiving) payments. After linking their payment details users will notice a small “$” icon above the keyboard that can be used to open the payment screen. From here, it’s just a matter of entering the amount and hitting send.

According to Facebook product manager Steve Davis, once the money has been sent it is transferred through Facebook who holds the payment for “seconds”, and then sent directly to the recipient’s bank. If the recipient has not set up Messenger payments, Facebook will hold the payment until they link a payment option to their account.

Why Facebook entered the market

So what prompted Facebook to enter the payment market? And why are they providing this service for free? The answers to these questions are actually quite simple, and if you’ve followed Facebook over the years, they won’t come as a surprise. 

Facebook makes a substantial amount of their money from advertising, $3.59 Billion in Q4 alone. This revenue stream means Facebook doesn’t have to monetize payments directly. Instead, they can focus on keeping people engaged with their platform and most importantly viewing News Feed ads. 

“We realized that there were all these conversations [on Messenger] that were forced to go somewhere else in order to actually finish,” Davis said. “You had to go to another platform to actually pay another person.” So it would appear Messenger payments is more about keeping customer on their platform, than opening up new revenue streams.   

The future of messenger payments

Facebook has been less than clear about their long term plans for Messenger Payments, but it’s possible that this is the first step in making Messenger the hub for your day to day life. Comparisons are already being made to Asian messaging app “WeChat” which allows you to send money to friends, make payments and e-commerce purchases, and even hail taxis. 

The potential impacts go beyond easing our day to day lives as well. If opened up internationally, Facebook payments could offer migrant workers a simple and affordable alternative to expensive remittance services. 

For now, it is important to remember that Facebook isn’t interested in becoming the next big payment gateway; they are strictly focused on payments between friends. But Facebook’s inclusion of payments will put pressure on other social networks to implement similar features. 

With many social networks lacking the resources to develop their own payment systems, there is room for established payment gateways to capitalize. In the coming years social networks will likely depend on effective payment processes as much as ecommerce. Payment gateways that recognize the unique needs of social networks and design products to meet them can look to tap the billions of people who use social networks daily. It may be in its infancy now, but with Facebook leading the way, social payments could be the next wave of online transactions. 

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