Coming soon: The Bank of Facebook?

A new move in Ireland to issue digital currency positions the social media giant to become a major player in mobile payments and money transfers.

By MSN Money Partner Apr 24, 2014 9:55AM

A European woman using Facebook on her iPhone. © Frank May/dpa/CorbisFortune on MSN MoneyBy Erik Heinrich, Fortune


The social media giant Facebook (FB) is seeking a license from Ireland's central bank that would allow it to become an e-money institution able to issue its own online currency similar to bitcoin, according to sources familiar with the deal. The news was first reported by The Irish Times and others earlier this month.


Facebook's e-money -- which might receive regulatory approval as early as this month -- would be valid across Europe and allow its users to store and exchange digital currency over the social network. Facebook has also entered into discussions with a number of European companies that facilitate international remittances of money over the web.


"Its focus on mobile money transfers makes sense," says Eden Zoller, a London-based analyst with technology research firm Ovum. "These applications are gaining good traction with consumers, particularly in emerging markets where Facebook has ambitions to be the prime platform from which people access and interact with Internet services."


If Facebook succeeds in obtaining an e-money license for Europe it will be joining other non-banking companies -- including Google (GOOG), Vodafone (VOD), T-Mobile (TMUS), and Sprint (S) -- who are competing head-to-head with traditional banks by offering mobile and web-based financial services.


This burgeoning trend promises to radically reshape the global banking industry by knocking down barriers to competition and bringing financial inclusion to the world's unbanked masses in developing countries from Haiti and Afghanistan to Kenya and Zimbabwe.


The Bank of Facebook? It's a radical idea, but it could boost the Menlo Park, Calif.-based company's revenue and keep it relevant to a new generation of mobile users who have eschewed its status updates and candid photos. But a move into e-money and financial services would mark a major strategic shift for a company that today generates the bulk of its revenue and profit from advertising.

But there remains a huge untapped market for banking services, including the exchange of money between family and friends living in different cities, and international money transfers between family in developed and developing countries. For this reason, e-money makes sense: Facebook has some 200 million members in Asia, for example. (About half of those are in India, which is Facebook's single largest market outside the U.S.)


Google has already obtained an e-money license in Europe, and last year it introduced a new version of Google Wallet for Android phones, making it possible to send money to anyone in the U.S. who has an e-mail address.


The U.S. wireless carriers T-Mobile and Sprint have in the last 12 months launched mobile money services that cater to the 68 million Americans without a bank account or debit card. These services use a smartphone app that makes it possible to conduct a variety of transactions, including check deposit, retail purchases, and bill payment.


U.K.-based Vodafone -- which, like Google, has an e-money license for Europe -- is perhaps the biggest trailblazer among non-banking companies when it comes to offering banking services, and is a driving force behind Kenya's M-Pesa, the world's most successful mobile money wallet.


But Facebook may be in for an uphill battle when it comes to convincing users in developed and developing countries that its proposed online currency is a safe bet.

"Facebook will have its work cut out, and the biggest challenge will be consumer trust," Zoller says, adding the firm's research indicates just 1 percent of people trust social networks like Facebook to handle m-payments, compared to 43 percent for banks 13 percent for credit card companies.


And the ongoing issues with Bitcoin -- scandal, fraud, volatility -- hurt electronic currency's reputation and serve as a hurdle for Facebook, which has had its own issues dealing in e-commerce. "The Facebook Credits virtual currency got nowhere and was wound down last year," Zoller says, "while the main m-commerce offering in place today, Facebook Gifts, has so far received a muted response from consumers."


More from Fortune


13Comments
Apr 24, 2014 1:29PM
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Sorry, but, Facebook is not one of my things. Don't need it, don't want it and don't like it. I do have a life and don't sit on it playing games out of boredom and reading who cooked what for dinner that evening. If I want to view someone's else photos of where they went on vacation or see photos of the family members showing off something new, I will contact my personal friends and family members directly. The friends you make on Facebook or merely acquaintances. They aren't really your friends! My friends are who I've had all my life and we care and love each other as family and we talk on the phone and do things together when our time permits it. Those are who I call real friends in my book. So Facebook can add on all the new features they wish, but, WE won't be using it.
Apr 24, 2014 2:08PM
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Take it at face value. LOL out loud.
Apr 24, 2014 2:00PM
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I keep in touch with friends using SKYPE for international calls, sometimes e-mail. I don't need 400 "friends" on Facebook.  One fellow I know invited me to join his social media group I changed his e-mail status and he has been deleted from my address books.
Apr 24, 2014 2:18PM
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Facebook is a scourge.  Like Obumma is to America.  You let it in your life for 2 seconds and it wants to take over.  Thanks for the forced healthcare Mr. Nojobcreator.
Apr 24, 2014 2:17PM
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Non-government money = GOOD

Facialbook = BAD

Janet Yellen can take her Federal Reserve notes and shove them in her ..... Facebook app.

Jun 1, 2014 7:11PM
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There's an idea!  Let Facebook in on your financial information!  LMFAO!

With their top notch security, what could possibly go wrong?   LMAO!
Besides, there is no advantage to using facebook money when you could just as easily use bitcoins or moneypaks.
Facebook money will not be anonymous, like bitcoins and moneypaks are, so the money will be easily tracked.

I see no advantages to this and MANY ways it could go horribly wrong!

Good thing that the black hats are so sympathetic towards people who leave their money laying around!   ;~)
Facebook should be expecting problems in the near future!

May 30, 2014 3:50PM
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There is already an app called Quickcoin in which a person can send cash tips on Facebook using Bitcoin.  Facebook can try to compete, but the entire point of Bitcoin is that there is no centralized "Bank" or owner of the cash being sent.  I personally would not trust Facebook with my banking information.  They have not proven to be trustworthy in the area of security. 
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