Messenger Is Becoming Facebook's Mobile Wallet: And Why It Might Work

Again and again, the key to success in digital commerce has been convenience, ease of use and a huge installed base.

There is almost nothing easier and more commonly used than chat. And Facebook's installed base of 'friends' is the envy of the world. Google and Apple have both tried to create the killer finance app - and largely failed to make their system the go-to solution. Will the third time - and competitor - be the charm? JL

Parmy Olson reports in Forbes:

The real secret to payments is not the app but fulfillment. Facebook is following a path pioneered by Asian chat apps like WeChat and LINE who have developed thriving businesses by branching out of chat and into hosting other e-commerce businesses. But there are big cultural and practical differences between Asian and Western markets. Facebook will have to do it differently to account for the market differences.
Facebook has big plans to turn Messenger into an “Everything App” that will replace many others found on your smartphone, but one of the most important shifts will be turning it into an app that pays for things. Now code found inside Messenger suggests Facebook plans to turn on a feature to make digital transactions or even pay for physical goods in stores, according to a report in The Information.
A forthcoming software release will allow people with a Facebook Messenger account to pay for goods “in person” or “pay directly in Messenger when you pick up the item” without the need for cash, according to commands found in code for the current version of Messenger.
It’s unclear whether this would mean Facebook will go head-to-head with other companies that already have mobile wallet services, such as Apple Pay or Android Pay, or whether it will piggyback on those services instead.
The latter seems more likely. Mark Zuckerberg said in January that Facebook would “partner with everyone who does payments… We look at the stuff that Apple is doing with Apple Pay, for example, as a really neat innovation in the space that takes a lot of friction out of transactions as well,” he said during a conference call with investors.
Zuckerberg also said that Facebook wasn’t planning to make money by taking a cut from transactions made through Messenger, but rather use the boost in e-commerce to enhance its advertising business.
Also within the Messenger code were commands for users to tap “suggested businesses,” which could mean Facebook will look at people’s “likes” and behaviour online to direct them towards relevant businesses on Messenger.
Down the line, a feature like this could end up competing with Google’s own search business, with companies paying Facebook to help boost their visibility on Messenger, just as they can already pay for search ads on Google.
Facebook recently told FORBES it had been working with around two dozen businesses like Uber to set up official accounts on Messenger since March 2015, and most have been used for customer service enquiries.
Clothing retailer Everlane, for instance, was one of Messenger’s first enterprise users and currently has around two customers service agents chatting with roughly 200 U.S. customers each day about their shipments, through Messenger.
But a major limitation for these early businesses has been that none, except for Uber, have been able to take payments on orders through the app, even though Facebook has had a peer-to-peer payments service since last year.
More business partnerships are on the way, though. Facebook founder Mark Zuckerberg is widely expected show off a number of businesses that have set up shop on Messenger when speaks at F8, the company’s annual conference for developers on April 12,
according to developers who work with Facebook.
The success of Facebook’s bigger payments play on Messenger will be down to execution. “The real secret to payments is not the app but the backend and fulfilment,” says Edison Investment Research analyst Richard Windsor, “and how this will work is unclear.”
He pointed out that Facebook is following a path pioneered by Asian chat apps like WeChat, LINE, and KakaoTalk, who have developed thriving businesses by branching out of chat and into hosting other e-commerce businesses.
But there are big cultural and practical differences between Asian and Western markets, says Windsor. “While Facebook is on the right lines when it comes to expanding Messenger’s functionality, it will have to do it differently to account for the market differences.”
Still, Windsor predicts that Facebook will manage to create a thriving ecosystem on Messenger that will “double its revenues over the next five years or so.”