Tuesday, November 19, 2019
Fresh off a series of congressional inquiries, technology giants Facebook and Google are planning to broaden their reach with new payment and banking services. Facebook stated it is consolidating payment functionality across its social media apps – Facebook, Messenger, Instagram and WhatsApp onto a single payments platform, called Facebook Pay. Meanwhile, Alphabet Inc., parent of Google, reportedly is working to expand its Google Pay app to function more like a bank.
The Wall Street Journal reported that Google's plan, code named Cache, is to offer consumer checking accounts beginning next year. The service would be offered through the Google Pay app, but checking accounts would be maintained at various U.S. banks. The mega-bank Citigroup, is said to be partnering with Alphabet on the project, as well as Stanford (University) Federal Credit Union.
"Our approach is going to be to partner with banks and the financial system," Caesar Sengupta, general manager of payment solutions at Google, said in an interview with the Wall Street Journal. "It may be the slightly longer path, but it's more sustainable." He also indicated that Google would be partnering with additional banks on the project.
These partnerships may help Google to overcome consumer unease with moving all their banking activities out of traditional financial institutions. A new study from Novantis and the Consumer Bankers Association revealed that while about half of consumers recently surveyed would feel comfortable using an online-only bank, nearly 80 percent would not consider keeping savings with a tech company like Google, Facebook or Amazon. The more cash a consumer has available the less likely they are to place that cash in a tech company-offered savings account, the researchers found.
Consumers may be reluctant to place savings with tech companies, but Facebook is betting they still want to use its social media platforms to transact payments. With Facebook Pay, consumers enter their preferred payment once to make purchases across apps they choose, "instead of having to re-enter your payment information each time," said Debrorah Liu, Facebook's vice president for marketplace and commerce.
"People already use payments across our apps to shop, donate to causes and send money to each other," Liu said in a Nov. 12, 2019, blog post announcing the new platform. "Facebook Pay will make these transactions easier while continuing to ensure your payment information is secure and protected."
Facebook Pay is available to Facebook and Messenger users in the United States for fundraisers, in-game purchases, event tickets, person-to-person payments on Messenger, and purchases from select pages on Facebook Marketplace. Liu said Facebook Pay supports payments using credit and debit cards as well as PayPal accounts, and are processed through "partnerships" with payment companies, like Stripe and PayPal. She added that Facebook Pay is being run separate from the Calibra wallet, which Facebook is developing to run on its planned Libra cryptocurrency network.
Both Facebook and Google have been taken to task by congressional leaders over perceived anti-competitive behavior and issues around consumer privacy. Many lawmakers also have questioned Facebook's Libra project. Additionally, the Federal Trade Commission this summer hit Facebook with a $5 billion fine to settle a long-running investigation into the company's privacy practices. Under that settlement Facebook agreed to a new FTC-directed consumer privacy and data security regime for the company. The $5 billion tab is said to be one of the largest civil penalties ever levied by the FTC.
In a July statement to staff that was released to the public, Facebook CEO Mark Zuckerberg said, "The agreement will require a fundamental shift in the way we approach our work and it will place additional responsibility on people building our products at every level of the company. It will mark a sharper turn toward privacy, on a different scale than anything we've done in the past."
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