Facebook P2P

Why do I think Facebook P2P is a big deal?

1) Evolves Facebook’s network from social graph toward commerce and advertising

2) Enables participants (and FB) to monetize their networks

For readers of my blog, you know my view that Facebook has enormous potential to create a new form of social advertising that is far more powerful than banner ads and search. The primary reason I use Amazon for everything is product reputation. Imagine a future where facebook would allow social networks to create reputations on businesses and products from within “communities” where you participate (clothing, organic food providers, restaurants, local service providers, …).

The central challenge in executing against this vision is that consumer social interaction in FB today is not about commerce. This is why ad click rates are so low.. they don’t capture intent. Enhancing FB community’s ability to discuss products and services will help them capture more intent, and enhance the overall interaction of their network. But how do you get your network to start discussing “commerce”!?  Why would a consumer invest time (reviewing) here?

P2P Payments is a core service that would allow FB participants to monetize the value they create. Each and every person could become an advocate and an expert. Youtube self service videos would go to FB first as they enable creators of the videos to create communities, followers and revenue. P2P is Facebook’s first step to add commerce to community.

Given how far Facebook is ahead on Targeting and Attribution, combined with it’s champion position as the only channel where manufacturer’s interact directly with consumers.. means P2P and new commerce interaction will unlock a massive new “graph”.

Questions on P2P

If you want me to roll my eyes in any forum.. just mention P2P. P2P is simply the largest consistent failure in the market (with Obopay as the poster child)… technically, and as a business model. Consumers don’t split bills with friends at a bar, or pay their babysitters on their phone. P2P money flows are just too unpredictable .. and business models compete with FREE! (Paypal, Google, Cash, Intra Bank, ClearxChange). In this case FB has a solid business objective..

How does facebook enable this P2P? The only thing we know is that involves debit card linking. This is not a new service at all (See my blog on Visa Money Transfer from 5 years ago).  The transaction sets that Visa and Mastercard set 5-7 years ago are still not ubiquitous across all banks.. they may be “mandatory” but the big banks just don’t care.  Square Cash was the first product to break the mold and enable ubiquity, it did this through skipping the official VMT/MSS transaction set and issuing a credit/refund to the beneficiary (that was technically against the rules).

I would love to get more details on how FB will work (in the US). My guess? They structured a P2P routing business that combines ClearxChange (History here from its days as BAC-WFC Pariter) for top 5 bank P2P, and Visa/MA VMT/MoneySend for all else. This would give participating banks a “choice” between implementing the card networks transactions sets or going through ClearXChange.  My sources tell me the price of participation in Clearxchange is $60M (as core member). This routing approach would allow Facebook to work across 95%+ of US p2p transactions out of the box.It would also give Clearxchange its very first business outside of the Bank’s own online banking transfer service.

3 thoughts on “Facebook P2P”

  1. I think it is interesting they didn’t go the cash purse route (i.e. Paypal/Venmo). There are a lot of reasons to or to not do that but if your customers are just moving money from one friend to another on FB and not cashing out consistently you take your transaction costs to zero. I am sure they weighed the legal and reporting options and decided this was more practical for the time being but compare that to China where Xiaomi announced this past week a mobile cash wallet that earns 3% interest (http://recode.net/2015/03/17/chinese-phone-giant-xiaomi-tests-mobile-wallet-that-pays-interest/ ) I do wonder if they are missing something.

    With that said, I think one of the ancillary benefits to and one of the areas of potential in FB and banks teaming up, and going back to your last post on identification and your motif of partnerships in payments, is the amount of data FB has and new ways it could be utilized. Imagine if you travel to some distant corner of the world, check-in on FB when you land, and your bank could recognize and automatically adjust its fraud triggers appropriately, for example.

  2. “P2P Payments is a core service that would allow FB participants to monetize the value they create. Each and every person could become an advocate and an expert.”

    How is the value captured in a consistent fashion so that it can be accounted for, and used as a medium of exchange?

    It sounds to me like they’re thinking of a currency (like Linden dollars) that sits inside the FB community, enabling members to trade without the need for cash. Monetising the Like is one way of doing it but only if the way the value is created can be regularised and governed otherwise it will value-less not value-able.

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