Facebook’s potential in financial services has been a recurring topic on my blog for the last couple of years. With this month’s announcement that Facebook has approached leading US banks with a request to access transaction data, another piece of the puzzle falls into place.
According to the Wall Street Journal, Facebook has asked the largest US banks to shared detailed financial data in exchange for user data already collected by Facebook, as well as the possibility to enable deeper customer interaction through the Messenger platform.
This information comes out shortly after Facebook stock price dropped 20 percent, eradicating more than $120 million in shareholder value. Even though Facebook had recovered the Cambridge Analytica scandal, declining user and revenue figures as well rising operating cost due to an increased focus on security and managing fake news on the platform spelled a nightmarish guidance for investors and analysts.
While it may seem as a reactive move to counter recent developments, this is rather another step in Facebook’s long-term path towards payments and financial services. Ever since the launch of Facebook Pay, back in 2015, Facebook has followed a steady course on this path and making a move towards collecting transaction data marks a clear ambition towards the next step in Facebook’s evolution.
In late 2017, Facebook finally unveiled their newly acquired licenses for e-money and payment services out of Ireland. The rumors of Facebook entering the payment space in Europe has been going on for a while, ever since it was reported that Facebook applied for a money transfer license a while ago. The combination of chat and payments have already proven to be a great success, as exemplified by the launch of Facebook Pay, Snapcash by Snapchat, WeChats integrated payment solution and Kakao Pay in Kakao Talk in South Korea.
Facebook messenger ’s chatbots will have a significant impact on banking and are predicted to usher in the end of the app-era. By transitioning from graphical UI til conversational AI, a majority of banking services could be automated through simple chat request like “what is my daily spending limit until my next paycheck” or “approve and pay my outstanding bills”.
If we look beyond payments as an isolated service, Facebook as a licensed payment service company is representing several scenarios banks should pay close attention to.
In Europe, Facebook will not need to get the banks’ permission to access these data as long as they have obtained user consent. The coming payment service directive 2 (PSD2) is requiring that banks need to offer payment APIs to third party-providers of financial services and allowing users to mandate licensed third parties to 1) initiate payments and 2) extract account information.
Despite recent privacy concerns, Facebook continues its relentless path toward executing on their long-term journey. Facebook has over the years, Facebook has gone through a transition from just a social network to a cross-platform platform before becoming a digital ecosystem and a family of stand-alone apps centered around your digital identity. This is the key component that gives Facebooks ecosystem a competitive advantage against Apple, Amazon, and Google. As long as Facebook maintains your personal and social digital identity in a user-friendly way, the switching cost is too high for most users for anyone to challenge Facebook’s position.
Facebook is already in a unique position to disintermediate retail banks as the most powerful digital ecosystem out there for consumers. The key to Facebook’s powerful position is the ability to evolve alongside changing user behavior, and so far, Facebook is excelling at this.
We can all agree that Facebook is no longer cool, but the fact is that Facebook does not need to be cool on their own accord. Facebooks ability to create a digital ecosystem where third-party apps are depending on Facebook’s digital infrastructure takes care of that. Cambridge Analytica whistleblower Chris Wylie experienced this first-hand when his user account was suspended from Facebook, and he found himself unable to log on to popular dating-app Tinder.
The fact that Facebook has established themselves as a key component in our digital lives makes Facebook still a formidable force to be reckoned with in the fight for future customers attention.