Press-Republican

FYI...

April 19, 2014

Why Facebook is getting into the banking game

(Continued)

Facebook has about 100 million users in India. One can send the euro equivalent of $200 from Germany to India for $1 in a matter of days using a London startup called TransferWise, set up by Skype's first employee Taavet Hinrikus and another Estonian, Kristo Kaarmann. Facebook might be able to improve on that by guaranteeing instantaneous transfers, and perhaps by offering lower prices, because it is so huge. Facebook is reportedly talking to TransferWise and its peers about some kind of partnership.

A European e-money license is only one piece of the puzzle Facebook needs to assemble if it is to muscle into the migrant remittance market. It would need to secure regulatory approval and set up or acquire an infrastructure in India and other large developing countries. The important part is making it easy for people to withdraw cash. Vodafone's e-money operation, M-Pesa, solved this in Kenya by setting up a nationwide network of agents who pocket most of the commission the service earns. Facebook has ample motivation to try something similar: If it made a quarter of a cent on each dollar transferred to India by migrant workers, it would have a $177 million revenue stream.

If companies such as Facebook and Google build up experience serving the unbanked in the developing world, they could someday challenge retail banks in rich countries. For the time being, getting involved in the remittance industry could be an interesting way to monetize user bases that are not particularly valued by advertisers.

 

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