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Facebook marks its territory in mobile payment with peer-to-peer tool

Facebook unveils a peer-to-peer payments tool on Messenger. Is it the next disruptor in the payments market? Also in Searchlight: Microsoft and Alibaba give biometrics a try; Yahoo says sayonara to passwords.

You can now send instant messages and money transfers in the same Facebook conversation. The question for CIOs...

is, should they care?

Facebook announced this week that it's adding a new payment feature to its Messenger app. The peer-to-peer payments service, which will roll out in the U.S. in a few months, allows desktop and mobile users to link their debit card information to Messenger and instantly send money to Facebook friends through the app. While it's too early to say what, if any, implications the service will have for the workplace, analysts say Facebook's foray into consumer mobile payments is just one more reason this technology space bears watching.

"I think all IT execs should be aware of what's happening in mobile payments now because there are a ton of … changes happening," said Sucharita Mulpuru, a principal analyst at Forrester. Mobile in-person payments and peer-to-peer payments in particular, she said, are evolving quickly. Forrester estimates that mobile payments will grow in volume from $52 billion in 2014 to $142 billion by 2019.

In the case of Facebook, the social network's massive reach means that anything it does in the mobile payments space can't be ignored, as Gartner analyst Brian Blau told Mashable. Half of the company's user base -- 745 million -- log onto the network using a mobile device; plus, the company's Messenger app claims more than 500 million users.

Is Facebook aiming to become an e-commerce giant, à la Amazon? Probably not, according to Mulpuru. She pointed out that Facebook is explicitly excluding business commerce with the tool -- at least for now.

"It's really about creating more 'stickiness' for Facebook Messenger and keeping people within Facebook rather than going to another app or tool to transfer money," Mulpuru said. Right now, the function is only available on the Messenger app, not the main app, and is limited to friends on Facebook. Moreover, Facebook's previous retail ventures have focused on virtual games and goods, and those haven't been terribly successful, she said.

Still, the fact that Facebook felt it had to mark its territory in mobile payments provides some insight into how big tech thinks about the future.

"Like all of the big technology companies, they're diversifying their bets. I think the chance that any one bet is going to pay off is less than 10% -- but that's why they're placing so many bets," Mulpuru explained.

Bets like the one Facebook announced this week are an indication that more and more Internet commerce and transactions are shifting to mobile devices, she said, and now consumers are able to authenticate transactions on these same devices. That shift is something CIOs need to be tracking. While there isn't yet a tool available that's the obvious choice to replace payment cards and card readers, "it is going to be something, so be aware," she said.

CIO news roundup for week of March 16

Here are some other tech stories from the week as we get into the swing of March Madness:

  • Microsoft says hello to biometrics… The company is introducing a biometric authentication feature, called Windows Hello, into its new Windows 10 OS. Users will be able to unlock their devices with an iris scanner or fingerprint reader. Chinese e-commerce company Alibaba is also embracing biometrics, adding facial recognition software to its mobile payment service. Smile to Pay, which will launch in China first, authenticates payments by matching the user's photo, taken at the time of purchase, to a stored profile photo.
  • …and Redmond also says goodbye to Internet Explorer. The company announced at the Microsoft Convergence conference in Atlanta that IE will take a back seat to the new Windows browser, code-named Project Spartan.
  • Yahoo, meanwhile, is taking another route to digital security -- by ditching passwords. The company launched "on-demand" passwords, a system which functions much like the second "factor" of two-factor authentication. Yahoo will text users a new four-character password every time they log on.
  • Target has agreed to pay $10 million to settle a class-action lawsuit regarding the huge data breach it suffered in 2013 that compromised over 40 million customer payment cards. Under the proposed settlement, the giant retailer said it would also appoint a chief information security officer.
  • Turns out that if you're someone who works for tech giants like Facebook and Google, you can pay for privacy. A New York Times article examines the growing practice among tech executives of requiring anyone who has worked on their homes to sign nondisclosure agreements. Ah, the irony.

Check out our previous Searchlight roundups on business use cases for the Apple Watch and highlights from Mobile World Congress 2015.

Next Steps

Get in-depth coverage of Facebook's person-to-person payment tool on ComputerWeekly. Then, head over to Data Mill to learn why CIOs should keep an eye on consumer messaging apps.

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Do you plan on using Facebook's peer-to-peer payments tool?
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I can't imagine anything I would use this for. I just don't trust Facebook enough to allow them to touch my bank account, and I can't imagine any transaction I'd make with a friend that I wouldn't prefer to do with cash or check.
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Haaaaahahahahaha no. Payment tools are helpful, but to be brutally honest, I'm not interested in sending any business payments through a service that treats my information as something to sell. On the personal level, I have other ways of sending money when I need to, including methods that are far more secure.

Besides, it can take a few days for the transactions to actually show up in an account - speed is also an important consideration.
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thanks for the responses, guys. if FB irons out the kinks (according to them, transactions take the same amount of time as it would a regular online transfer; security; etc.), do you think it would gain traction among you/your peers? Personally speaking, more and more people in my peer groups are using Venmo, for example. I agree though, that there is what FB is planning to do with our data to consider.
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I don't even use the Messenger app. I refuse. If someone messages me on Facebook I use the browser interface to read them. PayPal has spent years earning my trust and building a reputation, and they are widely accepted. I just don't see any value to having yet another peer-to-peer payment system that is more limited in scope (friends only) and isolated to a mobile app (Facebook messenger only).
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Venmo has its own issues though...while it doesn't come with the baggage that Facebook does, there are plenty of security concerns there. My feeling is that the most successful peer-to-peer payment system is going to grow out of an ecosystem that consumers already trust with their money and identity. 
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very good points; Venmo doesn't yet have the consumer trust,  dedicated fraud teams and strong security practices that established payment companies like PayPal, and banks, have. And FB's new tool hasn't proven itself yet to that point, either. I feel like right now, Venmo is more a popularity thing than reliability. Maybe FB will learn from Venmo's mistakes? I read somewhere that FB encrypts its transactions and works with an anti-fraud team, among other things. But you're right, it's early days yet.
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I would absolutely use it. I wouldn't be one of the first users; maybe wait at least a few months, at a minimum, for any bugs to be worked out. But yes, there have been instances when I have wanted to make a personal payment to someone who did not have a Paypal account, but was on Facebook. Examples are my dad's cleaning lady and home health aids. My dad lives in the next town over, and I try to help with finances because he often forgets to pay people or bills.  I have had to drive and meet people in order to hand them a cash or check. I absolutely would have offered to pay them over Facebook to avoid the trip.

Other uses I can think of would be to pay small businesses or hobbyists, such as a handyman, babysitter, or craft sellers, who don't have credit card processing systems. 
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thanks for the real-life examples, abuell! def a good point that not everyone has PayPal, and Facebook has a very wide reach. and it looks like fb has had some more success with businesses using its platform for payments abroad (i wish i could remember the source for that). at any rate, it looks like fb has officially brought biz into Messenger!
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