Facebook Delves Deeper Into Banking and Financial Services

Facebook Delves Deeper Into Banking and Financial Services

by September 12, 2018

Facebook is delving deeper into the financial services business, now attempting to persuade large banks in the US to share detailed financial information about their customers including card transactions, shopping habits, and checking account balances, according to a report published last month by the Wall Street Journal (WSJ).

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Over the past year, Facebook has asked JPMorgan Chase, Citigroup, Wells Fargo, and US Bancorp to discuss potential offerings it could host for bank customers on Facebook Messenger, anonymous sources told the WSJ, but concerns over data privacy have been a sticking point for the banks in their conversations with the social networking giant.

One US bank pulled away from the talks with Facebook, citing privacy concerns, according to the report. Facebook’s response has been to assure banks it won’t use data for targeted advertisements and will not share it with third parties.

In an emailed response to the report, Facebook denied that it is “actively asking financial services companies for financial transaction data.” Instead, the firm claimed it wanted to work with banks on bringing more services to the platform. Messenger counts some 1.3 billion monthly active users.

“Like many online companies with commerce businesses, we partner with banks and credit card companies to offer services like customer chat or account management,” Facebook said.

“The idea is that messaging with a bank can be better than waiting on hold over the phone — and it’s completely opt-in.”

Similar services already exist on Messenger with American Express, Mastercard, MoneyGram, and PayPal integrations, but Facebook is looking to expand its partnerships with more traditional banks.

Facebook started hinting its intentions to expand in financial services in 2014. In 2015, it launched a new payments feature  for Facebook Messenger that allows users in the US to connect their Visa or Mastercard debit card and send friends money on iOS, Android and desktop with zero fees. The feature was expanded to support group payments in April 2017.

In December 2016, the firm was granted an e-money license from Ireland, paving the way for Messenger payments in Europe.

Facebook’s expansion into financial services mirrors a broader trend among the world’s Internet giants, including Google and Amazon.

US e-commerce giant Amazon entered the financial services industry over a decade ago and now offer tools and services mostly focused on payments, cash deposits, and lending.

Apple launched Apple Pay in the US in 2014, before expanding to China, Australia, and Canada, among other countries. Later on, it introduced Apple Pay Cash, a peer-to-peer payments feature via iMessage.

In China, Internet giant such as Alibaba Group and Tencent Holdings have already emerged as serious competitors to banks in offering online financial services.

Tencent’s payments service was number one in China when measured by daily or monthly active users as of March 2018. Its Licaitong wealth management service had more than 300 billion yuan in assets as of January 2018, while Weilidai, its nascent lending business, had outstanding loans of more than 100-billion yuan at the end of 2017.

Ant Financial, the payments and financial services arm of Chinese e-commerce giant Alibaba, runs Alipay, one of the world’s largest online payments platforms. Valued at US$150 billion, topping Goldman Sachs’ US$88 billion in market capitalization, the firm has played a big role in shaping the fintech landscape in an increasingly cashless world. In June, it expanded into the global remittance market by launching a cross-border remittance service powered by blockchain technology.

In August, Ant Financial unveiled plans to expand to Africa. In a partnership with the United Nations Economic Commission for Africa (ECA) along with the International Financial Corporation, the firm says it will promote digital financial inclusion in the continent through investments and technical assistance.

According to an Infosys Finacle survey of 300 bankers, almost half of banks and credit unions consider large tech companies to be a “significant threat.”