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Facebook Inc. watchers have had their antennae sensitized for some time for any scrap of news that might indicate the massive social network’s tendencies in payments. The company’s Monday announcement that it has begun supporting carrier billing for digital goods sold on its platform appears to be no exception. Already, observers are asking whether the announcement portends broader moves by Facebook in online payments, and possibly into physical-world transactions.
The move comes just three months after Facebook said it will no longer support its digital currency, Facebook Credits, and will instead let developers price their games and apps in local currencies. Now, with carrier billing added to the mix, mobile developers will be able to sell a broad array of virtual goods with streamlined transactions and, possibly, higher conversion rates.
Facebook is working with U.K.-based mobile-payments processor Bango.net Ltd. to provide the new service. Mobile users in the U.S., the U.K., and Germany are now able to buy from Facebook sellers with two clicks, one click on the “buy” button and a second click to confirm the transaction. The purchase will then appear on the user’s monthly carrier bill.
Bango depends on a database of hundreds of millions of mobile IDs to authenticate users and strip down the transaction process to two clicks. The company says this streamlined process delivers an average conversion rate of 77%, compared to 40% for what it calls “conventional” carrier billing. “Our product is a step beyond carrier billing,” says Richard Leyland, head of marketing communications at Bango.
Sellers can expect to collect 60% to 70% of the value of the transaction, with the 30% to 40% fee split between the carrier, Facebook, and Bango, says Leyland. The exact split among these parties is not available, but it would appear carriers will be getting somewhat less than the 30%-50% fees they normally collect on carrier billing. Though Leyland stresses that Bango doesn’t control pricing, he says mobile operators’ cut is “a very small percentage.” Developers are thus left with a take that compares to what they get on sales on online marketplaces such as iTunes and Google Play, he adds.
What, if anything, the move into carrier billing means for Facebook Payments, the social network’s transactions unit, remains unclear. A Facebook spokesperson did not respond to an inquiry regarding the company’s plans, if any, for expansion beyond games and apps. Some observers see carrier billing as a step in line with the decision to phase out Facebook Credits. Supporting local currencies and offering two-click mobile transactions, they say, will allow the network to expand the array of goods it can sell on its platform. “They do see the opportunity beyond gaming and beyond digital goods,” says Beth Robertson, director of payments research at Javelin Strategy & Research, Pleasanton, Calif.
Still, such a move will require payments processing that exacts a lesser toll on sellers, she adds. Carrier billing may work well for certain virtual goods, but may not scale well for broader commerce. “I just don’t think it’s a model that can endure long term, it’s too pricey,” she says.
In other mobile news, American Express Co. became the latest company to integrate with Apple Inc.’s new Passbook wallet, and Starbucks Corp. said it will complete an integration by the end of the month. At least a dozen major companies have now said they will support Passbook, in addition to the 200-plus Apple stores in the U.S.
Part of Apple’s new iOS6 operating system, Passbook allows users to store tickets, loyalty cards, boarding passes and other such documents. While the AmEx integration will not allow actual payments, it will offer information about current and recent transactions and about current balances.
Meanwhile, Starbucks said it will update its iOS6 app for its prepaid card to support Passbook. The app allows customers to pay at Starbucks by scanning a barcode that appears on the screen of their iPhone.
