Facebook's plan for Europe exposes the complexity of taking P-to-P global

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Messenger is one of Facebook's most requested services in the U.K. and France, making these markets ripe for the platform's new P-to-P payments capabilities.

But in taking the service internationally, Facebook may also reveal its limitations. The functionality of Facebook Messenger P-to-P does not cross borders — a U.K. Messenger user cannot send funds to a French recipient and vice versa. This was not an issue when the service launched solely in the U.S. in 2015, but it could be a major pain point in Europe, where borders are less of an obstacle to social connections.

That said, most of these issues can be overcome by Facebook's sheer scale. The company has over 2 billion active users, and 1.2 billion use its Messenger platform, dwarfing even the 900 million users of the massively successful WeChat platform in SE Asia. That’s nearly 16% of the global population using Messenger. Converting just a small percentage of this base into users of P-to-P payments could be highly lucrative, particularly if the social network can enable cross-border remittance capabilities.

However, this is no small task.

A cross-border conundrum
Of course, Facebook may not be trying to build a global payments network out of just three countries, but the P-to-P endeavor highlights the disconnect between Facebook's social network and its money network. And there are certain complexities to cross-border payments that Facebook is wise not to confront right away.

Facebook is launching P-to-P payments in two markets that while being geographically close to each other, have very different patterns in usage of messaging apps and P-to-P payments. According to research by Kenshoo published in December 2016, 53% of French internet users and 48% of U.K. internet users had Facebook Messenger. This is on par with the usage of other platform; 50% of U.K. internet users were also users of WhatsApp and over a quarter of French internet users were also users of Skype. Since Facebook owns WhatsApp, it has already fragmented its user base.

What may be even more problematic is the established level of existing P-to-P payment usage in each of these countries.

In the U.K., 50% of internet users use PayPal, compared to just 35% in the U.S. Further, in France, checks have a tenacious hold on payment activity. According to the European Payments Council, French people write an average of 37 checks per year, compared to an average of just seven across the EU. With these existing and entrenched habits for payment already in place, Messenger may have some difficulty in gaining traction.

Additionally, Messenger P-to-P can only be linked to a debit card, and while the transaction occurs instantly, the settlement of funds can still take one to three business days depending on the connected financial institution.

Bigger picture
Facebook Messenger P-to-P payments also have a long way to go in the U.S. before they are successful. According to recent survey of nearly 4,000 U.S. consumers by 451 Research, just 1% of them had used P-to-P payments in Facebook Messenger — less than Venmo, Square Cash, Google and FI payment solutions such as Zelle.

However, focusing purely on usage metrics may be missing the point regarding the role of P-to-P by Facebook — the focus is not singularly on payments, but on building Messenger as an application rich ecosystem in its own right, akin to SE Asian platforms such as Alipay and WeChat, with P-to-P being just one more reason not to leave the messaging environment.

Stan Chudnovsky, head of product at Facebook Messenger, describes Messenger’s evolution as an “ecosystem for buying.” However, Alipay and WeChat have some advantages in terms of the early adoption of messaging as a platform over other forms of communication and a massive domestic audience that has grown to trust these platforms. Facebook still has a long way to go in nurturing consumer trust for something as sensitive as payments.

Facebook may also have one more trick up its sleeve when it comes to nudging Messenger users to conduct transactions — its AI platform known as “M.” Along with the news of expanded geographical reach of its P-to-P payments service, it was also announced that it is launching M suggestions for Payments — an AI embedded in Messenger that intuitively makes suggestions relating to payments in parallel to an existing chat. One of the reasons for the tepid adoption of Messenger P-to-P payments may be simply down to a lack of awareness of the service. With M suggestions proactively encouraging P-to-P payments, Facebook has the ability to educate would be users in real time.

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P-to-P payments Mobile payments Facebook U.K. France U.S.