Facebook Targets PayPal With Mobile Payments Tool

Facebook is testing a mobile payment system whereby users' credit card information would be automatically entered into shopping applications.

Confirmed by the billion-member social network, the system is currently being tested, ahead of an expected launch later this year.

The system relies on users entering their billing details into Facebook, and once saved these will be automatically entered when a user logs into a shopping app with their Facebook account.

Initially reported by AllThingsD then confirmed by a Facebook statement, the company said: "This product is simply to test how we can help our app partners provide a simpler commerce experience. This test does not involve moving the payment processing away from an app's current provider."

Despite speculation that this represents Facebook engaging in direct competition with PayPal, the social network said it "continues to have a great relationship with PayPal".

Convenient

For users the service is a convenient way to pay for goods without needing to remember and fill out billing details, but for Facebook and its advertisers it represents an opportunity to gain valuable insight into users' spending habits.

The website currently earns the majority of its revenue from displaying adverts, but Facebook will want to do more than generate leads and send shoppers elsewhere to make the purchase; with the proposed payments system, Facebook could advertise and sell products in the same place and without users leaving the site or application.

Manoj Menon, managing director of consulting firm Frost & Sullivan told the BBC: "Facebook does not want to remain just a platform for brand promotion and lead generation, but it wants to become the place where ecommerce deals actually happen...it is a fantastic move."

Trust

Many users already have their credit card details stored by Facebook, having made purchases in games like FarmVille, or bought real-world items though the network's Facebook Gifts service, launched last year.

Speaking to AllThingsD, retail analyst of Forrester Research, Sucharita Mulpuru, questioned how many credit card numbers Facebook actually holds, and whether users would be willing to give these details to it.

"Nobody trusts social networks with their financial information, and they are certainly not going to trust Facebook. Maybe they have a few million people that have bought something on things like FarmVille, but that does not a network make."

Mulpuru also questions Facebook's thinking behind getting into the mobile payments industry, when PayPal is a clear, well-established leader.

"PayPal is well-suited because they have more than 100 million accounts with real people who have trusted them with their information. To be a latecomer to the game in something as complex as payments they would be better off buying Square."

When contacted by IBTimes UK, a Facebook spokeswoman said she can confirm the company is working on a payments test, but has no more details to provide at this stage.