Facebook has already moved into the world of “virtual currency”. Facebook Credits, costing 10 cents each, can be exchanged for game points or gifts. Warner Brothers has even offered the chance to watch Harry Potter and Batman films for 30 Facebook credits.
Credits are an attractive business proposition for Facebook. Participating merchants receive 70 per cent of the amount spent on their products; the other 30 per cent goes to Facebook, in a similar economic model to Apple’s iTunes store. But Facebook’s credits, and the fact that it takes payments for them in over 40 currencies, with exchange rates adjusted daily, suggests something more determined than mere fad. eMarketer predicts that Facebook made $470m (£291.5m) in revenue from credits in 2011, about 11 per cent of its total business. Inevitably, some market watchers wonder how long it will be before Facebook starts holding deposits and acting like a bank. With 800m existing customers providing potentially huge economies of scale, Facebook could, in theory, provide some of the best deals on the planet.
Gartner predicts one of the social networks, likely Facebook, will be active in financial services by 2014. Social networks, after all, have access to vast amounts of customer information, already willingly provided by their users. There can’t be many banks who would turn down an early warning of when their customers have a baby, change jobs, marry or divorce. What insurance company wouldn’t want to know when their customers start contemplating a house move or a new car purchase? So, while advertising remains Facebook’s primary source of revenue, banking could feasibly be a highly alluring and lucrative second stream.
What about other technology giants like Apple? A company with so many brand loyalists is unlikely to sit back and watch all this happen. It has already filed a patent for a new iWallet service, which will give users control over all their financial accounts and enable them to make credit card transactions via their phones. In fact, there is strong evidence to suggest that Apple customers would like the tech giant to shake up the banking industry in the same way it transformed the music industry with iTunes. A survey of more than 5,000 consumers in the US and UK, released just a couple of months ago, indicated more than 40 per cent of current Apple customers would consider using the company as a bank. Overall, one in ten respondents indicated they would consider leaving their current bank for Apple.
Couldn’t ever happen? I wouldn’t bank on it.
Iain Regan is global head of sales and client services for Firstsource Solutions.