Facebook is close to obtaining Irish regulatory approval for providing financial services in the form of remittances and electronic money.
The social network is only weeks away from obtaining regulatory approval for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process.
The authorisation from the Central Bank to become an "e-money" institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as "passporting".
Obtaining an e-money authorisation in Ireland would require Facebook to hold capital of €350,000 and segregate funds equivalent to the amount of money it has issued, according to legal experts.
International headquarters
Such a move is likely to further embed the company in the Republic, where it employs some 500 people at its international headquarters.
Late last year, the company moved to double the size of the office space it rents in Dublin’s south docklands, offering it significant capacity for expansion.
Facebook has also discussed potential partnerships with at least three London start-ups that offer international money transfer services online and via smartphones: TransferWise, Moni Technologies and Azimo, according to three people involved in the discussions.
In the case of Azimo, Facebook offered to pay the company $10 million to recruit one of its co-founders as a director of business development, according to people familiar with the situation. A Facebook representative said the company did not comment on “rumour and speculation”.
A foray into migrant remittances is part of Facebook’s push to increase its presence in emerging markets.
Developing world
"Facebook wants to become a utility in the developing world, and remittances are a gateway drug to financial inclusion," said a person familiar with its strategy. Facebook recently passed 100 million users in India, which is its largest national market outside the US. But it is unclear if people will trust Facebook to handle their money, given concerns about personal data mining by the social media network to boost advertising on the site.
The money transfer project, led by Seán Ryan, Facebook’s vice-president of platform partnerships, signals a strategic shift for the firm, which makes most of its money from advertising. It also comes as other internet groups – in particular, China’s Tencent and Alibaba – race to turn their sites into mobile payment platforms.
Mobile paymentss
Google has reiterated its commitment to expanding its mobile payments and wallet products, which have yet to be widely adopted by consumers. It is registered in the UK to issue electronic money, in a process similar to the authorisation which Facebook is seeking in the Republic.
Facebook is already authorised for some forms of money transfer in the US, allowing it to process payments for developers who charge users for in-app purchases.
In 2013, the company facilitated $2.1 billion worth of transactions, almost exclusively from games, according to documents filed with the Securities and Exchange Commission.
Facebook takes a fee of up to 30 per cent for such payments, and these fees account for about 10 per cent of its revenues. Vodafone has acquired an e-money licence for the phone company to operate financial services in Europe.
“It’s great news that non-banks are challenging the traditional banking monopoly,” said Simon Deane-Johns, a UK-based lawyer and European payments expert at law firm Keystone Law. – (Copyright The Financial Times Limited 2014)
