Facebook Inc. (Nasdaq: FB) is joining other major tech and e-commerce companies like Apple, Inc. (Nasdaq: AAPL) and eBay Inc. (Nasdaq: EBAY) in the run to revolutionize mobile payments for a new generation of smartphone-friendly users.
Following an announcement in June that the San Francisco-based social media giant was developing a streamlined payment service to “monetize the mobile web,” Facebook officially introduced its new “frictionless” mobile payment service in the US, UK, and Germany on Monday made in partnership with the mobile technology company Bango Plc. (LON: BGO).
“Bango now provides Facebook mobile web carrier billing as part of an improved mobile payments flow,” Bango said in a statement announcing its partnership with the struggling social network.
The benefit of the Facebook’s expanding ecommerce service, the statement claimed, is that it “enables Facebook’s mobile web users to easily purchase digital content without the use of premium SMS messages or the limitations of credit cards,” which allows users to “enjoy frictionless operator billing, paying on their phone, without the need to register personal details.”
The promise of this new venture for Facebook is the chance to increase its user conversion rate substantially. While founder and CEO Mark Zuckerberg has scrambled to reassure investors and users alike of the company’s continued viability as it sinks to ever deeper post-IPO lows, Facebook has offered up enhanced services offering a greater yield from the social media network’s tremendous social capital that has yet to be effectively monetized. Earlier this month, for instance, the company rolled out an alpha version of its new advertising system known as Facebook Exchange. The social media company and its advertising partners alike both boasted that it had an enormous potential to increase online marketers’ return on investment.
A new mobile payment system may be even more enticing for Facebook than increased ad-based revenue streams, however. This is simply because it offers a chance to monetize the massive user-base Facebook already has directly, rather than using that user-base as leverage to attract advertisers and other investors. The advantage of partnering with a company like Bango is that it gives Facebook an experienced e-commerce developer who might be able to figure out that illusive question of monetizing users more readily than Facebook itself has managed.
“Conventional operator billing is expected to achieve a 40% conversion rate,” Bango said in its Monday statement. The problem then, according to Bango, is that “most mobile commerce customers who click 'buy’ do not successfully buy. Billing with the Bango payment platform delivers an average conversion rate of 77%. Most users who click ‘buy’, do buy,” the company said.
Bango has managed to maintain such a successful conversion rate because it stores all financial information and payment data from its users across all of its app stores (the company also already works with BlackBerry App World, Google Play, Opera Mobile Store, Electronic Arts, CNN, among others). And making payments as “frictionless” as possible, many a mobile payment service are now realizing, has the additional benefit of eliminating transaction costs, or at least those that are traditional made apparent to a consumer when they have to pull out their wallet, travel to an ATM, or re-enter their credit card information before making a new purchase. Using the existing “billable identities,” Facebook can then allow users to forego the traditional identity verification process that stalls payments, confuses users, and has many a critic up in arms.
For the time being, the streamlined payment system will only be used to facilitate digital transactions on Facebook itself. But given Bango’s other high-profile financial partners that straddle the line between e-commerce and physical retail, Facebook could very well be speculating on additional types of transactions as its service continues to expand across the globe.