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Facebook to Introduce Payments Linked to Credit Cards

This article was written by in Privacy and Security. 10 comments.


Now that Facebook is a public company, it’s under pressure by its shareholders and investors to show that it has a plan to generate revenue. The company’s latest plan is to expand its system for virtual payments — the use of credits to buy add-ons to games — to include direct, real payments.

Facebook seems to be as much a part of a young person’s life as email had become for the slightly older generation. Since the company is so ubiquitous without any legitimate competing social networking website with an audience of customers as wide as its own, it’s hard to see how this plan will fail. The company’s executives are betting on the willingness for the site’s users to provide credit card information in order to seamlessly pay for who-knows-what online in their own currencies, with Facebook taking a nice cut from every transaction. (After all, there’s no competition in this space, and probably no regulation applies, so Facebook could take as big of a percentage of each transaction as they want.)

FacebookWith 900 million users worldwide, Facebook only needs a small percentage of users accepting this new technology in order to build a significant revenue source. In fact, if this catches on well enough, there’s no reason Facebook couldn’t become one of the most profitable businesses in the world. I wonder how history will look back on those of us who said Facebook’s IPO at $35 or so a share was wildly overpriced. It’s true that most of the 900 million users globally do not have access to credit cards, but this is probably only a temporary barrier. Access to credit will eventually grow in developing nations, but even if it doesn’t grow quickly, Facebook can surely find a way to serve users who want to spend their cash.

There is a general feeling in the media that people over-share on social media websites like Facebook, and a very vocal minority wonders why people are willing to share the most intimate details in their lives with a computer database that churns the information and presents it to marketers as a goldmine of data enabling companies to better sell their products. People wonder why someone would take things they create, like photographs, music, and essays, and provide the right for Facebook to keep this information and redistribute it in any form the company determines might increase profits for its shareholders.

If you use Facebook in this way and don’t see any sign of it dissipating, it makes sense to own some shares. that way, the company might be profiting on the details of your life, but you will, too.

Back to the issue of credit cards, up until this point, users have shared quite a bit of personal information with Facebook despite the company’s many gaffs related to privacy. The sharing of credit card numbers, however, needs to be held up to a higher scrutiny. A database of the world’s credit cards could wreak havoc in the wrong hands. And like companies that offer barely-visible subscriptions, such as those that perpetrate the trial offer scam, Facebook could easily take advantage of the less financially-savvy selection of users who might not notice their Facebook credit card charges or who might notice the charges but not consider how the expenses add up over time.

If you’ve purchased anything online in the past, Facebook will find a way to offer exclusive products that are interest to you, and linking your credit card to Facebook may be the only way to acquire whatever it is you desire. Facebook could easily emulate iTunes, Amazon, Spotify, and other revenue-generating sites. They could emulate Target and Wal-Mart, companies that offer unique products only available in their respective stores. The more I think about it, the more inevitable I think Facebook’s success will be with this plan. There just aren’t enough users willing to protest Facebook’s grab for credit card numbers for dissent to make a difference.

Will you provide your credit card number to Facebook to make it simple to buy products online? It’s hard to answer this question until Facebook shows what they have to offer, but it’s inevitable that a company as large as Facebook will be able to determine exactly what their users want and offer it to those users in a way they can’t acquire it elsewhere.

Published or updated June 20, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar jim

Right now Facebook doesn’t have anything I’d want to pay for. But if Facebook did offered goods or services that I wanted to buy then I would buy them and I’d use a credit card. How is this really any different than Apple or Amazon or any other online vendor selling stuff via credit card?

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avatar Mike Collins

I’m just not sold on Facebook. I realize they have almost a billion users but are they there to spend money or to just waste time with their friends? The typical user is someone in their teens or early twenties who probably doesn’t have a ton of disposable income, though I realize there is nothing stopping them from going into credit card debt to buy whatever virtual services Facebook offers.

I also think the youth of their market could be a problem. If users become fickle and migrate to a new network it could all go up in smoke. Obviously there is no real competitor out there right now and unseating them would take a monumental effort, but FB has had a few bungles before that could lead them vulnerable. And I’m sure the folks at MySpace thought they were on top of the world until FB spoiled their fun.

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avatar Smart Military Money

Luke,
I will not provide any credit card info to Facebook. I’m a “minutely” Facebook user too, for work and play. But I know better than to enter into a potentially disastrous profit scheme. There’s nothing on Facebook I want to buy. Hell, there’s not much on there I want for free!

-Christian L.

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avatar Ceecee ♦53 (Newbie)

I don’t even want a Facebook account. It’s just putting too much out there. They’ve had issues with hacking. So now, if you “like” certain companies, it won’t look odd of there is a charge for something they sell, even if you didn’t make the purchase. I’m not sold.

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avatar Evan

Exactly to your point in the post – I would provide facebook with my CC just like I would to amazon! Right now there is nothing to buy but if they figured out a way to work with a retailer I think sky is the limit.

I also don’t understand why they don’t figure out the search business

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avatar Lance@MoneyLife&More

I think I will avoid giving them my credit card info as I can’t imagine anything I could only buy from them. Unless they come out as the new lower cost Amazon I have no need for a new farmville lawnmower.

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avatar qixx ♦1,890 (Half-Dollar)

I don’t trust Facebook enough to give it many of my personal details or even post updates. I will not be giving Facebook Credit Card info.

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avatar Yana

No, I would never give Facebook a credit card number – I don’t even give them my real name! I like PayPal very much, and if that isn’t good enough, I probably don’t need to spend the money. It is a trust issue. I don’t trust Facebook, while I do trust Amazon.com . I am a FarmVille player, and there was a time when I would actually purchase farm cash! I used PayPal. When I got disgusted with Zynga’s methods, I vowed not to make further purchases, and I have not done so for over a year.

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avatar wylerassociate ♦162 (Cent)

count me out as someone who will give facebook my credit card information. It’s risky for me to give facebook that information.

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avatar VGA

This seems like an exercise in putting the cart before the horse.

First, Facebook needs to have goods and services that people actually want to buy. So far, it has those side bar ads for things I could care less about, and getting extra points for games I don’t play.

Then it needs to be able to provide that merchandise in a better (or as good) interface as Amazon or Wal-Mart or whoever. This is harder than it sounds. If I post in my status, “I want to buy a TV” then showing me ads for TVs makes sense. Of course, this doesn’t even touch on the problem of getting people from their Facebook feed into an online store so that they can do some serious shopping. If I post, “I bought a TV” or “I love my new TV” then displaying those ads is an exercise in futility as I am no longer in the market.

Then, after all that is accomplished, it can ask for credit card info and take a cut of the purchase. And I will happily give out my credit card information since FB helped me get what I want in a timely and efficient fashion. But given FB’s penchant for shoving things I didn’t want down my throat (e.g. Timeline), I’m not going to hold my breath that this endeavor is going to be particularly profitable. More than likely, it will be one of a many small income streams that FB uses to bring in money, not an e-commerce game changer.

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