Facebook's peer-to-peer (P2P) transfer app is currently only a screen grab circulating around Silicon Valley, but payments companies should brace for a series of competitive apps from the social network, according to industry experts.
The social network is prepping a P2P service that would be imbedded in Facebook Messenger, according to TechCrunch.com, which attributed its reporting to screenshots taken by Stanford computer science student Andrew Aude. Aude and Facebook did not return requests for comment by deadline.
Payments analysts told PaymentsSource P2P is a likely and natural entry into payments for Facebook, and serves as a stepping stone to a broader solution set. "Incorporating a P2P capability into Facebook makes sense, since their environment is a mirror of the real world where people interact and pay each other all the time," said Thad Peterson a senior analyst at Aite Group. "And given the size of their user base, they will have a powerful presence from day one."
Facebook 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. Facebook's other payments initiatives include a recently added "buy" button in a U.S.-only test.
"The beauty of P2P is that it has the potential to grow virally," said Rick Oglesby, a senior analyst and consultant at Double Diamond Payments Research, adding one person signs up for the service, then the recipient must also sign up to receive the payment. "So ultimately, Facebook is using its customer's money to acquire additional customers. Although on a transaction basis they may be losing money, the loss is often small compared to the marketing costs that would be incurred to sign up those customers through traditional means."
The payments industry has been anticipating a bold payments strategy from Facebook since it hired former PayPal president David Marcus earlier this year to run Messenger. Marcus was at PayPal when it acquired Braintree and its Venmo P2P service.
"P2P is obviously a natural place for Facebook to start in payments," said Zil Bareisis, a senior analyst at Celent. "People are already communicating and exchanging messages, photos, videos, etc. via Facebook, so adding a 'financial message,' or a payment, is a logical extension of that behavior."
All of the analysts PaymentsSource contacted said P2P would be just the start for Facebook, which would use the service to add more payments and e-commerce products.
"[Messenger P2P] is a good launchpad for other products," Oglesby said. "More than likely, messenger payments will be used to enroll consumers into a service that in the future could be used by consumers to make purchases from merchants, which is where Facebook would be able to monetize the service."
Person to person payments is also seen as a smaller market than other payments, such as e-commerce or in-store retail.
"P2P service is hard to monetize, so it is usually a stepping stone to other payments, usually involving a commercial party such as a small business or a merchant that can request a payment," Bareisis said.
Facebook could additionally leverage its substantial number of business users to add payments through the P2P service.
"Given the number of corporates and businesses on Facebook, providing a way for people to transact directly from those pages, rather than just 'like' them, creates a huge potential," said Gareth Lodge, a senior analyst at Celent.
But Facebook would face some challenges in attracting consumers to its P2P service. "My biggest concern with Facebook is demographics," Peterson said, adding that while Facebook's users in the U.S. are skewing older, "I'm not sure that an older audience, 30 or older, will adopt a P2P payment app in the same way that millenials have adopted Venmo."