Facebook Banking?

Over on the BankInnovation.net website, we are discussing whether or not there is a future for banking applications on Facebook.  Some argue that Facebook is just a social app and does not lend itself to more serious activities such as banking.

facebook_logoMy rebuttal is that I don’t see a clear line between banking and social activities. I think banking can be a social activity. There are some clear and fairly popular examples of increased interest in the social aspects of banking. So, if you can add social features to banking sites, why not add banking features to a social site? I am not sure if Facebook will ever replace dedicated online banking sites, but I do think some banking features could be become popular on Facebook.

There are some financial institutions that have “widgets” that you can place on your iGoogle page or Yahoo page. If you spend more time on Facebook than iGoogle, why wouldn’t you want to place that same widget on your Facebook page? If you are willing to send your friends money with PayPal, I’m not sure it would be a big stretch to send money to your Facebook friends with a similar service.

I think Facebook has a particularly special opportunity to be a P2P payment network. There are two main roadblocks to p2p payments. One, you are normally required to join some type of network (e.g. paypal) before you can exchange funds. Or you have to get your friends to give you some of their financial information (routing number, account number …etc) in order to send them money. Facebook solves the first problem because it is a site where millions of people already hang out , and you identify your friends (Facebook just overtook Blogger for the top unique visitor social media site) . The problem with Facebook is getting people to trust them or third party Facebook developers with financial information.

facebook_welcome_page_mapBanks could help fill the trust void by building financial “Vault” applications for Facebook. If I have an account with Wells Fargo, I could add the Wells Fargo vault application to my profile. The vault would store my account information. Then if one of my friends wanted to send money, they could just use the Facebook “Money Transfer” service to send it to me – without knowing any of my account information.  Facebook would simply connect my vault ID to my friends vault ID and our respective banks would handle the actual transfer of funds via the ACH network.

It is not a stretch to imagine a Facebook payments platform.  Facebook already allows people to post items for sale in their Marketplace and purchase virtual gifts. Their Spare Change program allows third party developers to collect fees for their programs via PayPal. In December 2007 Facebook announced that it was developing the next generation payments platform.  However, one year later Facebook suspended development on their payment platform without explanation.

There are third party applications that allow Facebook friends to tranfer money. Obopay, and Buxfer both have Facebook applications that allow users to send money to any other person.  However, niether of them use Facebook to faciliate connections between the sender and receiver of funds.  Both applications require that the user sign up with their particular service in order to receive funds.

Facebook certainly has a lot of financial services potential , but it also has a long way to go before it can be considered a reliable banking community. Unless they start paying more attention to security and customer support, the Facebook payment platform might go from suspended to expelled.

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