With trust in banks at an all-time low, the social networking site Facebook may be pitching their new scheme of allowing users to transfer money between themselves just at the right time. Reports suggest that although Facebook may have suffered a few PR disasters in recent times, they are still viewed as a trusted company by the public. Whereas traditional banking institutions are seen as untrustworthy, due to such events as the LIBOR scandal.
The services Facebook are planning to offer are not full banking facilities however, instead it will give its users the power to transfer money between one another. The system is similar to the way Paypal conduct banking business, in that you can bypass the banks and send or receive money for a range of goods and services, or simply send money to a friend.
It is not known yet whether Facebook users will be able to pay for goods and services with their accounts, but even if so, Paypal are not worried about the competition, as UK spokesperson Rob Skinner says: “We always welcome competition in the marketplace. We act as a kind of universal adaptor for payments across the world, so you don’t have to worry about all the different ways to pay, in fact around a quarter of the payments we handle are across borders.”
Paypal has already signed up around 2,000 retailers in the UK alone, and it is thought that this promoted the social network to start making plans for them to move into financial services. And with rumours that they are seeking regulatory approval in Ireland, the company’s European headquarters, to become an e-money institution, and are in talks with London money transfer startups, the move into financial services could come sooner rather than later.
So the signs are clear that Facebook about to launch a money transferring service, but are they about to take on the big banking institutions? An insider thinks not: “Facebook might do something in this space. I think something they most likely will do is in the remittance space, directed at Western Union – targeting money going from developed markets to emerging markets. A gap has been left in the international money-transfer market after most of the mainstream banks fled the space because of growing money-laundering concerns.”
For Facebook to offer a money transfer service will in no doubt boost the social network’s popularity, particularly amongst younger users. The service is expected to be a simple one to start, with Facebookers being able to store money onsite and transfer it across to people on their friends and family lists. And at present, although the moves are to allow European users to partake of the service, the plans are thought to encompass the US and eventually, the world.