Facebook to Test Its Own PayPal Competitor

by Mercator Advisory Group 0

Facebook reportedly plans totest a payments product that would allow consumers to shop on mobile apps usingtheir Facebook log-in information. The social network’s service would put it incompetition with a host of other one-click checkout providers. The test wouldbegin in about a month.

Thrillist-ownedJackThreads, a flash-sale shopping site for young men, is the pilot partner.The company has a strong relationship with Facebook, sees a good chunk ofrevenue come through mobile phone purchases, and may also have a decentdemographic overlap with one particular segment of Facebook users — gamers —who would have provided the social network with credit card information. Itwill be interesting to see if Fab, another close partner of Facebook’s thatdoes well on mobile devices, will follow suit.

The new product, iflaunched widely beyond its current small testing phase, would undoubtedly pitFacebook against digital payments giant PayPal on mobile devices. It would alsocompete with offerings from Google, Amazon and a host of startups such as Braintree,Stripe and Klarna, all up-and-coming outfits who are working, in one way oranother, to make it easier to make purchases on mobile phones. All of thesecompanies, including Facebook, recognize that it can be challenging to easilyenter your payment details on small devices.

If eventually expanded tomore partners, the product would also potentially give Facebook keen insightinto the shopping habits and preferences of the company’s users, a lucrativeset of data for the world’s largest social network to gather. At the same time,Facebook’s test is, for now, focused solely on creating a better mobilecheckout experience, rather than getting involved in payment processing.

The timing of Facebook’stest comes as the social network in September 2013 will stop supportingFacebook Credits and instead will support local-currency pricing. With itseffort to enable faster checkout for online merchants, Facebook is shifting itsefforts to helping more traditional online merchants, whereas Credits was usedprimarily within apps and for online gaming. Abandoned shopping carts is amajor problem for online merchants, and the easier consumers can get throughthe tedious process of ordering online the more sales will get completed.

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