Facebook Payments Test Isn't A PayPal Competitor, It's A Companion That Fills In Billing Info


Facebook is testing a way to make paying with a credit card easier, but it works with PayPal, not against it as AllThingsD wrote. The feature pre-fills credit card and billing info for making easier purchases through PayPal, Stripe, Braintree or other payment processors in third-party mobile apps. It’s not a payment processor itself, but could help Facebook prove the ROI of its ads.

Facebook’s first test isn’t even live yet with ecommerce app JackThreads, but here’s how it works.

Let’s say you click through an ad on Facebook to an ecommerce app or visit an ecommerce app on your own. When you go to make a purchase you’d normally have to type in your credit card and billing address information on your tiny keyboard. That’s a hassle that discourages people from actually buying things.

With Facebook’s new payments test, you’d see a button that says something like “Let Facebook Input My Billing Info”. You’d then see a data permission request asking you to allow access to the billing info you’ve previously stored with Facebook from buying Gifts or making payments in games. With one click, your permission fills in all that billing info and you can hit the “Confirm Purchase” button.

The payment is then processed by whatever processor the app already uses, be it PayPal, Braintree, Stripe, or whatever, and it collects its normal fee. In effect, Facebook’s payments feature is a data layer that rides on top of other payment services rather than competes with them. This is similar to how Facebook doesn’t compete directly with iOS and Android, but is instead a social layer on top of them.

Rather than collecting fees, Facebook’s payments test will give it data about whether your ad clicks lead to revenue for advertisers. Say you got that ecommerce app through a Facebook ad whose click cost the app $0.25. If you then make a $20 purchase using the Facebook info fill-in option, Facebook can then report back to the advertiser that their ad buy earned them a return on investment. That’s critical for convincing them to buy more ads.

Facebook could also use the same flow to make it easier for advertisers to buy those ads. In this way it could be part of every step of the mobile economy by:

  1. Letting advertisers quickly buy mobile app install ads with the billing info fill-in
  2. Serving those app install ads in the News Feed to get apps more users
  3. Aiding those apps to grow virally by offering its mobile SDK for baking in social sharing features
  4. Making it easier for the app’s users to make purchases with the billing info fill-in

Perhaps years from now Facebook could get serious and set itself up as a payments processor, but for now this feature has other benefits for Facebook beyond earning direct revenue at the expense of PayPal.

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