Daily Progress, Jacksonville, TX

Community News Network

April 14, 2014

Why Facebook is getting into the banking game

Who would want to use Facebook as a bank? That's the question that immediately arises from news that the social network intends to get into the electronic money business.

According to the Financial Times, Facebook is close to receiving authorization from Ireland's central bank to become an "electronic money institution." The status would allow it to process transfers and payments throughout Europe, where the market for non-bank financial services appears to be heating up with big new entrants such as Vodafone. The customers Facebook is targeting, though, might be as much in developing nations as in Europe.

The developed world, and Europe in particular, is far from the best place to break into banking. Most people are already perfectly capable of sending money to each other in various ways. According to the World Bank, the share of adults with bank accounts ranges from 98 percent in Germany to 45 percent in Romania, and financial inclusion rates in Europe will inevitably converge. Google has had an e-money license in Britain for almost three years, but its Google Wallet service appears to be bringing in little revenue. Full functionality, including personal transfers, is available only in the U.S., where 88 percent of people have bank accounts.

Facebook, however, may be taking aim at a different demographic: Migrants who work in the developed world and send money home to the developing world. This is an area ripe for disruption. The companies, some bank-affiliated and some independent, that now dominate the market tend to charge a lot for their services and mostly aren't much fun to use. Last year, they channeled a total of $404 billion in remittances, a number that the World Bank predicts will expand to $436 billion. The most expensive "corridor" runs from South Africa to Zambia: It costs $21 to send $200, according to the World Bank. The biggest recipient country is India, whose residents received $71 billion last year.

Facebook has about 100 million users in India. One can send the euro equivalent of $200 from Germany to India for $1 in a matter of days using a London startup called TransferWise, set up by Skype's first employee Taavet Hinrikus and another Estonian, Kristo Kaarmann. Facebook might be able to improve on that by guaranteeing instantaneous transfers, and perhaps by offering lower prices, because it is so huge. Facebook is reportedly talking to TransferWise and its peers about some kind of partnership.

A European e-money license is only one piece of the puzzle Facebook needs to assemble if it is to muscle into the migrant remittance market. It would need to secure regulatory approval and set up or acquire an infrastructure in India and other large developing countries. The important part is making it easy for people to withdraw cash. Vodafone's e-money operation, M-Pesa, solved this in Kenya by setting up a nationwide network of agents who pocket most of the commission the service earns. Facebook has ample motivation to try something similar: If it made a quarter of a cent on each dollar transferred to India by migrant workers, it would have a $177 million revenue stream.

 If companies such as Facebook and Google build up experience serving the unbanked in the developing world, they could someday challenge retail banks in rich countries. For the time being, getting involved in the remittance industry could be an interesting way to monetize user bases that are not particularly valued by advertisers.

 

1
Text Only
Community News Network
  • 20140727-AMX-GUNS271.jpg Beretta, other gun makers heading to friendlier states

    In moving south and taking 160 jobs with it, Beretta joins several other prominent gunmakers abandoning liberal states that passed tough gun laws after the Newtown shooting.

    August 1, 2014 1 Photo

  • Screen Shot 2014-07-28 at 2.21.22 PM.png VIDEO: Dog 'faints' from excitement of seeing owner

    A reunion between a Pennsylvania woman who had been living overseas for two years and her pet schnauzer has gone viral, garnering nearly 20 million views on YouTube.

    August 1, 2014 1 Photo

  • Why a see-through mouse is a big deal for scientists

    A group of Caltech researchers announced in Cell Thursday their success in making an entire organism transparent. Unfortunately, this isn't any kind of "Invisible Man" scenario: The organism in question is a mouse, and the mouse in question is quite dead.

    July 31, 2014

  • Screen Shot 2014-07-31 at 2.12.55 PM.png VIDEO: Five-year-old doesn't want her brother to grow up

    Sadie, an adorable 5-year-old from Phoenix, wants her brother to stay young forever, so much so that her emotional reaction to the thought of him getting older has drawn more than 10 million views on YouTube.

    July 31, 2014 1 Photo

  • lockport-police.jpg Police department turns to Facebook for guidance on use of 'negro'

    What seems to be a data entry mistake by a small town police department in western New York has turned into a social media firestorm centered around the word "negro" and whether it's acceptable to use in modern society.

    July 31, 2014 3 Photos

  • The virtues of lying

    Two computational scientists set out recently to simulate the effects of lying in a virtual human population. Their results, published in the Proceedings of the Royal Society B, show that lying is essential for the growth of a cohesive social network.

    July 31, 2014

  • Sunburn isn't the only sign of summer that can leave you itchy and blistered

    You've got a rash. You quickly rule out the usual suspects: You haven't been gardening or hiking or even picnicking, so it's probably not a plant irritant such as poison ivy or wild parsnip; likewise, it's probably not chiggers or ticks carrying Lyme disease; and you haven't been swimming in a pond, which can harbor the parasite that causes swimmer's itch.

    July 30, 2014

  • Survey results in legislation to battle sexual assault on campus

    Missouri U.S. Sen. Claire McCaskill joined a bipartisan group of senators Wednesday to announce legislation that aims to reduce the number of sexual assaults on college campuses.

    July 30, 2014

  • An alarming threat to airlines that no one's talking about

    It's been an abysmal year for the flying public. Planes have crashed in bad weather, disappeared over the Indian Ocean and tragically crossed paths with anti-aircraft missiles over Ukraine.

    July 30, 2014

  • Sharknado.jpg Sharknado 2 set to attack viewers tonight

    In the face of another "Sharknado" TV movie (the even-more-inane "Sharknado 2: The Second One," premiering Wednesday night on Syfy), there isn't much for a critic to say except to echo what the characters themselves so frequently scream when confronted by a great white shark spinning toward them in a funnel cloud:
    "LOOK OUT!!"

    July 30, 2014 1 Photo