Need money? Check your Facebook page

April 24, 2014: 6:09 AM ET

A new move in Ireland positions Facebook to become a major player in mobile payments and money transfers.

By Erik Heinrich

140424060145-coins-falling-u-s-pennies-currency-620xa

FORTUNE -- The social media giant Facebook 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, Vodafone, T-Mobile and Sprint -- who are competing head-to-head with traditional banks by offering mobile and web-based financial services.

MORE: With one website, a taste of the American Dream in India

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 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.

MORE: In Egypt, high hopes for mobile wallets

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 one percent of people trust social networks like Facebook to handle m-payments, compared to 43 percent for banks 13 percent for credit card companies.

MORE: What if America's unbanked had mobile wallets?

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."

  • 10 Questions: Mike Del Ponte, founder and CEO, Soma

    On trying to end the world's water crisis, recruiting talent, and discovering one's calling.

    FORTUNE -- Mike Del Ponte has long held an interest in the intersection of humanitarianism and entrepreneurship. After college -- where he earned a bachelor's degree in theology from Boston College and a master of arts in religion from Yale -- he spent time traveling around Nepal as a microfinance consultant, helping Nepalese women start their own businesses. After MORE

    - Apr 24, 2014 5:25 AM ET
  • The best and worst Apple analysts: Q2 2014 edition

    The amateurs beat the pros again this quarter, but not by much.

    FORTUNE -- It was almost like the Apple (AAPL) Earnings Smackdowns of old, where the free-wheeling amateur analysts -- focused obsessively on their favorite investment -- clobbered the Wall Street professionals by correctly anticipating a huge beat driven by stronger than expected iPhone sales.

    Except that six years ago, when we began this quarterly exercise, Apple was still growing by double digits, Steve Jobs MORE

    - Apr 24, 2014 4:59 AM ET
  • Apple's beat and 7:1 split: What the analysts are saying

    What are they are not telling their clients is that they missed a chance to make some money.

    FORTUNE -- If the small army of analysts who track Apple (AAPL) are embarrassed by their failure -- across the board -- to alert clients that Apple was about beat the Street's consensus and announce a 7-for-1 split, and that its shares might pop better than 8% in after-hours trading, you wouldn't know it from their post-earnings MORE

    - Apr 24, 2014 1:50 AM ET
  • Everything is 'early days' in Facebook's first-quarter earnings call

    CEO Mark Zuckerberg and COO Sheryl Sandberg tout experiments with new products, new ad formats and new acquisitions.

    FORTUNE -- Eager to prove it can still innovate, Facebook (FB)'s executives touted the company's increasingly complex slate of new projects in its first quarter earnings call today.

    Here's a taste: In the last quarter, Facebook has executed two major acquisitions ($19 billion for WhatsApp and $2 billion for Oculus Rift), launched an app called MORE

    - Apr 23, 2014 6:55 PM ET
  • Live: Apple Q2 results are in. Shares to be split 7 for 1.

    Apple reports earnings of $11.62 per share on sales of $45.6 billion, a Q2 record.

    FORTUNE  -- The numbers are in, and they're surprisingly good. Stronger than expected iPhone sales seem to have boosted both the gross margin and the bottom line. iPad sales were a little weak, due largely to channel inventory changes. Mac sales were up and the iPod business, as expected, has pretty much collapsed. Apple press release.

    In MORE

    - Apr 23, 2014 4:00 PM ET
  • Video: Apple's hot new TV spot

    "Powerful" is getting heavily re-tweeted, and the early reviews online are positive.

    FORTUNE -- Two years after marketing VP Phil Schiller's outburst, the team doing Apple's (AAPL) TV advertising seems to be "feeling it" again.

    The ad is available on YouTube.

    - Apr 23, 2014 2:14 PM ET
    Posted in: , , , ,
  • Etsy buys Grand St.

    The handmade marketplace has acquired Grand St., a commerce site for indie electronics.

    FORTUNE -- Etsy, the operator of a handmade marketplace, has acquired Grand St. Grand St., which sells indie electronics online, had raised $1.3 million in seed funding from First Round Capital, Betaworks, Quotidian Ventures, Mesa+, and angel investors. Just two months ago, the company had positioned itself as the "Etsy for electronics." From my interview with CEO Amanda Peyton at MORE

    - Apr 23, 2014 2:14 PM ET
    Posted in: ,
  • With HBO deal, Amazon Fire TV gains an edge

    Exclusive content deal makes select programing available to Prime Instant Video users.

    FORTUNE -- HBO fans take note: Amazon's Prime Instant Video is about to get better.

    On Wednesday, Amazon (AMZN) announced a content licensing agreement with HBO that makes select HBO programming available to watch on Prime Instant Video starting May 21. The deal is the first streaming arrangement with a subscription service agreed to by the cable network.

    The agreement includes older MORE

    - Apr 23, 2014 12:26 PM ET
  • What's an Instagram or Pinterest picture really worth?

    The tech startup Piqora raises $7.7 million to help marketers find out.

    By Heather Clancy

    FORTUNE -- Fast-growing visual social networks like the digital scrapbook Pinterest, photo-sharing service Instagram, or microblogging site Tumblr -- where, if you'll pardon the pun, image is everything -- certainly can't boast the sheer visitor reach of Facebook with its more than 1.3 billion active monthly users.

    But retailers and big consumer brands are flocking to them for MORE

    Apr 23, 2014 11:02 AM ET
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.