With PayPal president David Marcus leaving to join Facebook, the social network is positioned for a substantial market share grab in the digital payments industry.
Facebook already has a payments business that supports the games and other apps that run on its website. But Marcus is going to run Facebook's Messenger application, which today is little more than a cross-channel chat interface.
"Facebook did not hire Marcus just for his mobile expertise," says Jordan McKee, a senior analyst at Yankee Group. "Facebook's payments intentions continue to become more apparent and Messenger provides an ideal avenue into the space."
Facebook would not make Marcus available for an interview. "We do have a payments business which is a small part of our revenue, but [Marcus] won't be working on that. He is focused on Messenger," says Facebook spokesperson Vanessa Chan in an email.
But Messenger clearly has the potential to drive payments revenue for the social network.
"With over 200 million users on Messenger and one of the brightest minds in payments at the helm, the resulting product has the potential to be highly disruptive," McKee says. "From my understanding, no definitive plans have been made as to what Messenger will evolve into, but I imagine it could turn into something that looks very much like Tencent's WeChat or Braintree's Venmo on steroids."
Venmo is a person-to-person and mobile purchasing technology PayPal obtained with its 2013 purchase of Braintree.
Facebook's Messenger is a free service that allows people to send text messages that arrive either in a mobile app or on Facebook's website. Facebook recently began requiring mobile users to download a separate Messenger app instead of accessing the function through the main social networking app.
Messenger is automatically tied into a user's Facebook contacts, making it an ideal tool for P2P payments. Consumers can already send funds as email attachments through Google's Gmail, and Square has an email-based P2P service called Square Cash.
"Messenger seems best equipped to handle P2P payments, particularly in the short term," says Rick Oglesby, a senior analyst and consultant at Double Diamond Research. "But there are a lot of businesses on Facebook too. There may even be a long term opportunity to create a full point of sale payment network."
There's also an audience for social networking based payments and financial services15% of U.S. young adults are ready to use social media for banking right now, says Jim Van Dyke, CEO and founder of Javelin Strategy & Research. "I fully expect to see new attempts by Facebook to move into financial services or payments, simply because they now have a leader at the helm who brings the know-how."
Facebook is licensed as a money transmitter in the U.S. and has pursued a similar license in Ireland. The social network has pursued several payments projects over the past couple of years, and often serves as an enabling venue for other providers.
MoneyGram and PicomoPay recently partnered to allow Facebook users to send money to MoneyGram agent locations using PicomoPay's Facebook app. WePay uses Facebook data to help vet prospective business clients.
Facebook also has services for businesses that could be enhanced by payments, such as the data and marketing tools it offers to advertisers such as card issuers. About 30 million small businesses operate Facebook pages, and a number of large retailers also use Facebook for marketing.
Facebook has an opportunity to use the vast amount of data it accumulates from its business and consumer services to fuel payments and marketing, says Richard Crone, a payments consultant.
"[Marcus] is the quintessential person to bring those moving parts together," Crone says. "The challenge for Facebook is to increase the value of its advertising and promotions."