Last week, Facebook (NASDAQ: FB) announced it is launching Facebook Pay, a new payment service available for its users. In a blog post, Deborah Liu, Vice President of Marketplace & Commerce, introduced the new payments system. Facebook Pay was described as a "convenient, secure, and consistent" payment experience that is integrated across the Facebook, Instagram, and WhatsApp applications. The tech giant explained that Facebook Pay allows users to save their preferred payment method to use, view payment history and manage payment methods and settings, receive real-time US customer support via live chat, and clearly understand which payment services are part of Facebook. The blog post added that it envisions people using Facebook Pay for fundraisers, in-game purchases, event tickets, person-to-person payments on the Messenger app, and even purchases from select Pages and Facebook Marketplace businesses.
The payment service is simple. A user can find the feature in the Settings page on the Facebook website or app and add their desired payment methods including credit card, debit card, and PayPal (NASDAQ: PYPL). Facebook Pay also includes privacy features likes secure encryption and storage of bank and card data, as well as anti-fraud detection and notification. The firm is trying to win back users on the privacy front after its disastrous Cambridge Analytica and password storage scandals. Liu noted that the feature is separate from Facebook's ongoing plans to create the Libra stablecoin project, which uses cryptocurrency as a medium of exchange and store of value and is being marketed toward unbanked customers in developing countries. Facebook Pay will likely be used by Western consumers as a convenient, friendly payment option.
While Facebook Pay is not a revolutionary feature or even a new form of payment, it does give Facebook's millions of users more convenience and integration between the 3 apps. The frictionless peer-to-peer payment option could be an interesting newcomer to an already packed consumer finance sector. Facebook Pay will be competing with the likes of heavyweights PayPal (NASDAQ: PYPL) and subsidiary Venmo, Square (NYSE: SQ), Google (NASDAQ: GOOGL) Pay, and Zelle, the same-day peer-to-peer payment service owned by big banks. But Facebook Pay also has advantages, including making it easier for small businesses to sell and consumers to shop on Instagram and Facebook Marketplace. Financial and shopping data are also valuable to Facebook's major revenue generator in targeted advertising.
Finally, Facebook might just be seeking diversification even as it plans to tightly integrate its 3 main apps into a seamless experience. Earlier this year, Facebook debuted an online dating service that leverages the vast amount of social data users willingly give to the company. Although its highly anticipated Libra stablecoin faces enormous pressure from global regulators and competition from Coinbase's USDC and possibly even the Federal Reserve's upcoming digital dollar, Facebook Pay can be seen as a less risky bet, a no-frills entrance into a saturated consumer and commercial finance space that keeps growing.