By Erik Heinrich
By Erik Heinrich
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 (FB) 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% of people trust social networks like Facebook to handle m-payments, compared to 43% for banks 13% 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."
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The Bitcoin exchange business also launches its first consumer-focused product today.
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Even with permission, banks aren't eager to work with marijuana companies.
FORTUNE -- Late Friday the U.S. government released new rules that allow banks to work with licensed marijuana businesses. Banks have been reticent to provide services to companies in the burgeoning marijuana industry because the legality is murky. Marijuana is legal for recreational use in Colorado and Washington, and for medicinal use in 18 other states.
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The venture capitalist disputes arguments of another Valley bubble. Also: why Bitcoin is a breakthrough technology that's likely here to stay.
FORTUNE -- Contrary to arguments that Silicon Valley is repeating the same process that led to the dotcom bust in the early 2000s, Marc Andreessen argues tech is doing something entirely different: emerging from an industrywide depression.
"I think we're recovering from a depression, and I think we felt the MOREJP Mangalindan, Writer - Feb 12, 2014 7:00 PM ET
To hell with resolutions. I want answers.
FORTUNE -- Some people think of a new year as a time for resolutions, others for predictions. Me? Everywhere I turn, I find myself asking questions.
For example, I recently wondered why Jeff Bezos's wife, MacKenzie Bezos, so hated the book about Amazon (AMZN) by Bloomberg Businessweek writer Brad Stone, The Everything Store, enough to give it a one-star review. I answered that question here, MOREAdam Lashinsky, Sr. Editor at Large - Jan 5, 2014 11:59 AM ET
What some of the trendiest words in tech actually mean.
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FORTUNE -- Buzzwords are an unfortunate side effect of a burgeoning tech sect0r. The general public can't be blamed for being unfamiliar with the phrases tossed around Silicon Valley. Here are five of the most prevalent -- and often times misunderstood -- tech terms in vogue now:
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President David Marcus tells Fortune why he embraces digital currency, how he thinks the trend will play out, and when Americans can reasonably expect to go wallet-less.
FORTUNE -- The way PayPal President David Marcus sees it, wallets are on the way out. The question isn't "if" they become antiquated, but instead "when."
To wit, the payments company released a study this week that revealed that 83% of people polled in five countries, MOREJP Mangalindan, Writer - May 23, 2013 12:47 PM ET
With recent exposure bringing the online currency to the attention of wary lawmakers, expect to see Bitcoins disappear. But it may take a while.
By Daniel Roberts, reporter
FORTUNE -- If you want a chicken pita from Meze Grill in midtown Manhattan today, you can fork over $8.75 or give them about half a Bitcoin. The restaurant began accepting Bitcoin Tuesday and its owner is excited, although a manager on Wednesday said MOREJun 17, 2011 12:29 PM ET
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