I think that "be a payment provider" is a much easier thing to think than it is to do.
While it may be easy to build the customer side of the equation you've got to build a vast network of merchants willing to accept payment and that's hard work. Especially if you're trying to convince them to re-price in Facebook Credits?
Sure, you could charge 1% but people have added credits to their Facebook account at some point and it probably cost you more than 1% to allow them to do that. How do people buy credits right now? All those cost Facebook more than 1%, right? I buy $100 of credits, it costs F8 a couple of bucks, I then spend $100 of credits and they recoup $1 of it in merchant fees? Doesn't sound like a good business model.
Beyond the need to create a financial model that makes sense and then go out to find merchants and convince them there's a massive risk of merchant fraud.
Fraudulent merchant X signs up for a F8 Merchant Account. Fraudulent customers A, B, C buy something with stolen credit cards for $100 each. Everyone disappears after merchant X receives settlement. F8 is out of pocket to the tune of the original $300, another $300 in reversals to their bank and then $30-$60 of chargeback fees. If that happens enough then F8 might even have its merchant account revoked... though they're probably big enough to avoid that.
It's an excellent money laundering channel too and there's a lot of financial regulation to navigate around that.
I know that this stuff can be overcome but it is hard to do and would be a major piece of work. This type of thing nearly sank PayPal back in the day.
Well there's interesting ways to do that with Facebook though. A la you can't start selling large amounts of goods unless you have x number of likes on your page. Same thing, on the user side. You can only buy $10 worth of credits if you have a new account, accounts can be flagged, etc. I agree it's a pain in the ass to do, and much easier said than done. But it's definitely doable and hugely profitable. They can easily take more than $1 in merchant fees, and credit card companies will beg them for their business and give them great rates. Shoot, they can do a Visa or Mastercard exclusive and get even better rates at the beginning.
There are reasons for and against pursuing this particular niche, but I think Boris is really onto something. Selling ads is a safe bet, but FB really could wager a billion dollar fee to enter a new market. There must be markets where entering the field with a billion signed up users and a billion in capital will work, even if this isn't the perfect example.
While it may be easy to build the customer side of the equation you've got to build a vast network of merchants willing to accept payment and that's hard work. Especially if you're trying to convince them to re-price in Facebook Credits?
Sure, you could charge 1% but people have added credits to their Facebook account at some point and it probably cost you more than 1% to allow them to do that. How do people buy credits right now? All those cost Facebook more than 1%, right? I buy $100 of credits, it costs F8 a couple of bucks, I then spend $100 of credits and they recoup $1 of it in merchant fees? Doesn't sound like a good business model.
Beyond the need to create a financial model that makes sense and then go out to find merchants and convince them there's a massive risk of merchant fraud.
Fraudulent merchant X signs up for a F8 Merchant Account. Fraudulent customers A, B, C buy something with stolen credit cards for $100 each. Everyone disappears after merchant X receives settlement. F8 is out of pocket to the tune of the original $300, another $300 in reversals to their bank and then $30-$60 of chargeback fees. If that happens enough then F8 might even have its merchant account revoked... though they're probably big enough to avoid that.
It's an excellent money laundering channel too and there's a lot of financial regulation to navigate around that.
I know that this stuff can be overcome but it is hard to do and would be a major piece of work. This type of thing nearly sank PayPal back in the day.
Perhaps I'm missing the point here though?