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Seriously? Ads? (dinkevich.com)
283 points by Ryan_Shmotkin on May 30, 2012 | hide | past | favorite | 212 comments

>Fraud. Paypal and others use complex algorithms, special teams and God knows what. But Facebook has an unique and unparalleled data base of a user’s history, friends, activities and what not.

The author seems to confuse credit risk and fraud risk. Credit risk pertains to the probability of you being unable or unwilling to honour your commitments. Fraud, within this context, pertains to the unauthorised use of funds. Facebook's data may be a uniquely valuable to evaluating the former, but to fighting the latter it is less important than existing transaction history databases.

Financial fraud is an immensely complicated problem. An estimate quoted in The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments [1]. Cross-border payments are a niche unto themselves - even with margins as high as 10%, the fraud risk still poses a high enough barrier to entry that even the banks handle just 5-10% of remittances [2].

It's 11AM and so far Visa and American Express already have 1-3 data points of swipe activity on me. Over the day they'll get 5-10 swipes apiece (+1 NYC). Facebook has a tremendous amount of value in its dataset, but think for a moment about how much Visa, Mastercard, American Express, or your primary bank know about where you live, what you spend on (and by virtue when and where you spend it), and, by aggregating that data, who you tend to spend with. That is what's valuable for anti-fraud and by proxy payments processing.

[1] http://www.economist.com/node/21554743

[2] http://www.economist.com/node/21554740

"The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments"

For the ~$2 trillion[1] going through online payments, bringing down the online fraud loss by every 0.1% is equal to $2B, if over time Facebook can reduce that online fraud rate by 0.5% or more there is your $10B.

Using your real identity to make online payments could reduce that to real world levels.

If this is the case then reducing the fraud rate from 1.8% to 0.35% in online payments (a reduction of 1.45%) would calculate to a savings of $29B for this industry.

Thus, if Facebook is able to be a major part of that reduction by using real identities then they will get much of this transaction business. If they are able to pull this off there is no stopping them...

Feel free to rip me apart, but there is some validity to may arguments :)

[1] http://www.edgardunn.com/uploads/100012_english/100385.pdf

Using your real identity to make online payments could reduce that to real world levels

How many of your friends have had their facebook accounts stolen? For me, it's a few percent. "Oh look, another random acquaintance is stuck in Abu Dhabi and needs me to wire them some money"

Facebook security isn't nearly good enough to be handed my wallet. Actually it's not my wallet that's the problem, it's the wallet of everybody who uses "password" as a password.

> Facebook security isn't nearly good enough . . .

Pretty sure most cases where people's accounts get hacked have nothing to do with the security of the website, except inasmuch as the site fails to provide an authenticator. Most "hacking" involves getting a computer virus or entering your password into a site that is not actually Facebook.

This is true. On the other hand, online banking security starts from "the client computer is compromised", and a new service that says "you're fully liable if your machine is hacked" will have... problems getting traction.

"online banking security starts from 'the client computer is compromised'"

Facebook currently (or did) reset the password by having you identify the names of your friends using their pictures. I could see this as a way to authenticate a transaction.

Really? None of your friends have pictures of cats or their babies or grainy shots of them and four other friends as their profile pictures? Because sometimes it feels like half of mine do.

At that point your requiring about as much effort to authorize the transaction as you would be to enter a card number.

Also not sure how secure that would be , how difficult would it be for a would be attacker to find out who was in the images?

I imagine a reverse image search could be fruitful.

Very true, now the question is who they need to acquire to gain that technology (Square? Maybe, maybe not). Paypal processed US$ 71 billion in 2009, an increase of 19 percent over the previous year. I don't know what they did in 2011, but it might be around $100B?

The question is not if online payments is able to work, it is a question of if Facebook is able to crack the nut and reduce the fraud by using real identities. There are real problems as you have pointed out, but (and it is still a very big BUT) IF (and that is a very big IF) they are able to pull it off it will be a game changer for them.

The stricter PCI requirements that would come into play should mitigate some of these "hacks".

All told, it's probably more valuable and actionable information than Facebook will ever have about you. Oh look, you claim to "like" some restaurant that gave you a special deal for mashing the "like" button. Isn't that precious--meanwhile, you actually eat more often at this one just across the street.

It's the opposite: Facebook data can mostly help out with fraud (identifying, authenticating users) and is nearly useless for assessing credit risk.

Facebook data is not useless for assessing credit risk. People with high credit scores are likely to be connected to each other via social networks. The converse is likely also true.

Although it is controversial, banks seem to be starting to look at this.

This would be easy to game and would also encourage snobbery "I'm not going to friend him , he's poor"

Facebook does have data that can be used to fight fraud; e.g. "which of these 10 photos if your friend" or "which of these 10 cities did you visit last year".

Visa/Mastercard/Amex only have your transactions to go on so naturally they have spent billions building fraud tools around this data; that's not to say there are not a lot of other data points to build these tools.

But pay-with-facebook is also going to be limited to what you can buy - so thewir risk is greatly reduced

They don't have to worry about stolen cards used in the high street, they don't have to do cash advances, they don't have pin pads skimming people's pins in stores.

I've been on FB since the beginning. And I've never clicked on an ad. What makes you think I will to actually buy something?

I barely trust Paypal, you think I'm gonna trust FB with my CC details. You gotta be kidding.

There are a few steps FB must do before I'll trust them with anything other than bs about what games I'm playing now:

1. Convince me they take my security and privacy seriously. 2. Convince me they aren't selling my personal data (statistical or not) without my permission. 3. Allow me to export (backup) ALL my data to my drive easily. 4. All me to cancel my account (not that I would). And by cancel I mean remove all my data. No questions, no sales pitches to stay - just delete everything in my profile (and off their, FB, drives). FB says they do this, But there are plenty dead folk with active profiles. Despite families begging FB to delete them.

Until all this happens, FB gets nothing from me except an occasional post about my Skyrim adventures. Oh and commenting on the latest high school gossip (the latter being funny. I mean, there's a reason I left town 25 years ago and hardly kept in touch. But here we all are, FB friends.)

But you probably don't represent the average Facebook user. Most of my non-tech friends share everything - FB knows pretty much everything about them, and certainly for some of the younger ones, FB has become their primary communication platform.

For most of them, paying with Facebook would just be easier than using something else / remembering more details etc etc. And they probably trust FB more than they trust other companies with far less visibility (although most them have used their CC without any thought or concern on a load of different websites).

FWIW and personally, I completely echo your thoughts - although I'm sure I'd end up giving my CC details to FB as soon as a website that I needed to buy from offered no other method to pay than the FB one.

>I've been on FB since the beginning. And I've never clicked on an ad. What makes you think I will to actually buy something?

I'll offer a counter anecdote. I've been impressed by their targeted ads more than once and clicked!

It has to get hyper-specific though. Not like gender-targeting, for me it read that I liked linguistics at one point in my profile and offered me an add to by a Wug shirt. I was super impressed and spent time in their online store.

I've never clicked on a Facebook ad either, but I've run ads on Facebook and they got clicked a lot. The cost per new user was lower than Google Adwords.

I'm not sure it's a good idea to dismiss Facebook's chances at making money from ads yet. I've never clicked on a TV ad either, but stations make hundreds of billions of dollars from those ads every year. That industry took many decades to grow to that point though.

It's not whether Facebook makes money off the ads. We know they do. It's whether the advertisers make money from the ads that will demonstrate if there is a sustainable business model there.

FB allows you to buy gift cards from stores for credits, so for an outlier that doesn't trust Facebook with cc details, there's another option. Through buying Karma, they can bring gift giving into Facebook credits, so for someone's birthday you can buy a gift card through Facebook, and you can take your phone to the store and use your gift. This has tons of potential and you can for even more through Facebook. Think of buying tickets for events, or going to a small business' store and buying an item (Etsy style). Or Etsy, Amazon, eBay, etc setting up apps where you can use Facebook credits to buy (long term). I have two cousins visiting from India, and it's amazing watching them use Facebook. They're constantly on. Using it to connect with friends, play games, etc. This is a whole market the most people don't think of. These markets are huge. And as another user pointed out, all these kids using Facebook these days are growing up with it and will continue to use it, and trust it. It's a whole different experience that we don't really see.

I'm definitely not gonna trust FB with credit card or anything private. It is a company built on sharing, with repeated history of privacy issues. It's one thing posting there about my vacation and what I think of latest Hollywood blockbuster and quite another to give them a line to my bank account. For the latter I would rather have some company that has better privacy traditions.

Precisely. The ethos of the Facebook notion of sharing and privacy is antithetical to what a financial service needs to have.

One big reason I trust Paypal for everyday transactions is because they make money off of each transaction directly, whether through direct fees or merchant fees. I can understand their business model, and the service has a certain simplicity.

The OP wants me to give financial data to a company where my data is their product, and who is always trying to prise more "openness" from me through a byzantine privacy UI and borderline surreptitious app installations? I'll pass, thanks.

You seem to conflate [1 - what I want FB to do with regards to privacy] with [2 - what FB needs to do so I trust they won't steal my money]. The two have nothing to do with each other.

Realistically speaking, 1 may never happen, 2 is already there (even if you're only liable for $50 from unauthorized cc transactions).

What if what I spend my money on is private? I don't really want my spending habits to be social.

3. What facebook needs to do so I trust that other people can't steal my money through facebook.

If you're entering a CC then it's not your money that's on the hook.

You might not trust FB with your CC info but elderly/non tech savy people will. Remember, there is less of us and more of them. Point is to capture a bigger market, which clearly trusts FB with their most intimate details then why not CC?


My bank limits me to 8 alphanumeric for online access. It's pretty pathetic.

On the plus side, it's shorter than any of my other common passwords, so I'm not tempted to reuse it. I can say with certainty that my banking password is not in any DB on the tubes save my bank's.

>I've been on FB since the beginning. And I've never clicked on an ad. What makes you think I will to actually buy something?

FB has several billions of revenue from ads.

What makes you think you are not an insignificant outlier and that this move or any other doesn't concern you?

Just think people, if everybody did what I do on FB, would FB still exist? If the answer is no, then what you might or might not do, doesn't matter with regards to FB.

Despite the fact that FB makes money off of ads, do you think people would prefer to have ads on Facebook, or to not have ads?

I think the answer is obvious: people prefer no ads. "Advertisement" is a dirty word. People want a free, ad-less product, despite the fact that it's economically unfeasible.

That's a problem. What happens when it becomes more widespread or easier to install things like adblock? What happens if a browser comes along that blocks Facebook cookies and ads by default, but still allows the basic functionality of FB? Don't say it can't happen. We're just getting to the point in society where having everything about us on someone's server is "normal". Wait until there's a disaster of some sort, a major security breach, and see how fast people change their habits. It can happen overnight.

>I think the answer is obvious: people prefer no ads. "Advertisement" is a dirty word. People want a free, ad-less product, despite the fact that it's economically unfeasible.

Well, the answer might be obvious but might not mean much. For example a similar question would be "people prefer to pay for things, or get them for free?". I think the answer would be obvious here too.

>That's a problem. What happens when it becomes more widespread or easier to install things like adblock? What happens if a browser comes along that blocks Facebook cookies and ads by default, but still allows the basic functionality of FB? Don't say it can't happen.

Then the Ad industry will turn RIAA on the users, and will lobby the government for the disallowance of things like AdBlock ("our content is a package deal, you cannot see it, and thus benefit from it, without also seeing our ads").

And it might be successful too, because they will have the support of ALL other industries -- as ads are a crucial element of over-consumption on which they thrive. By leaving it to our "needs" and "wants" only, consumption would drop very low (IIRC, they have studied the effects of a prolonged (a week?) mass media strike during the seventies, and that was the result. That was short term though, long-term should be even worse).

Most people don't click on ads, but the minority that do can generate billions of dollars of revenue. The minority that do follow the ones that don't.

A recent report showed that the minority that click ads at facebook is pretty close to half. Not a bad minority to have using your site.

If you're talking about the report that batista referenced - I haven't seen it. 50% never clicking on an ad even once suggests that ad clickers are still a pretty extreme minority.

I'm pretty sure that I could have been counted as a clicker in that study - I'm sure I accidentally clicked on an ad at least once when I was on facebook.

Could you please provide a link to the report? 50% click rate is insanely high, nobody has that. It would be very interesting to know how Facebook achieved such miraculous performance.

>Could you please provide a link to the report? 50% click rate is insanely high, nobody has that. It would be very interesting to know how Facebook achieved such miraculous performance.

He is not talking about 50% click rate.

That is, he's not talking about 1 ad.

He says that 50% of FB users have clicked on ads at some point in their FB use.

Which might, or might not be true, but is not the same as "50% click rate".

Oh, you mean 50% of people that ever opened facebook have clicked on some ad at least once? Then it's not a very useful number - so suppose I clicked on some ad 5 years ago and since then never even logged in to FB - what use is to count that? I'd assume a useful number would be the number of active users regularly clicking on ads... IMHO 50% would be very high number then (unless you define regularly as "at least once in 5 years" :)

Yeah, I'm sure I accidentally clicked on a few ads in the days before I deactivated my account. So put me in that minority.

     FB has several billions of revenue from ads.
Groupon is also generating "billions" in revenue.

So far I haven't seen statistics or proof to indicate that advertising on Facebook is effective, although I've heard anecdotes to the contrary.

If advertising on Facebook proves to be ineffective, then they are in big trouble.

Why not, it worked out so well for Google with their deep search history, world-beating teams of big data specialists, deep pockets and massive Gmail/Gapps userbase... http://www.bloomberg.com/news/2012-03-21/google-said-to-reth...

Google Wallet is actually fairly useless. To load it up you need a credit card. If you have a credit card, you could just as well, uhm, use a credit card.

I think your parent was being sarcastic. We need a sarcasm tag in HTML.

Sarcasm is ignored on HN because it is such a contrarian culture.

No it isn't.

I was aware of that. But parent did raise an interesting point. Google Wallet isn't doing too great. Why?

> Google Wallet isn't doing too great. Why?

No support. You NEED to be able to reach a human being to clear up problems with credit cards.

I used google wallet to pay for a google apps yearly account. I also used a different card to pay for a couple games from the android market.

I dutifully checked all the options to make sure that the card I used to pay for those games could never ever be used to pay the renewal fee on the the apps account. Then one day I found that the wrong card had been charged for the apps renewal. I couldn't get ahold of anyone at google. I couldn't find any help online. I couldn't even find a phone number to call.

So I removed the cards from my wallet account. Cancelled the wallet account, and snarl "no" anytime google tries to get a credit card from me.

Just as an fyi, a phone number does exist for wallet: support.google.com/wallet/bin/answer.py?hl=en&answer=1350364

I cannot talk for everyone, but I use paypal instead of Google Wallet, because it allows me to pay without using credit card. I do think that current model of credit card payment is broken so I refuse to use it. Sure if dishonest merchant purges all my cash from credit card I could get it back by contacting bank, but money lost would be covered by all bank clients. I don't have much trust in paypal, but I can transfer to it appropriate amount of money from bank just before the payment, so possible damage is much lower. That said my level of trust with facebook is so low that I would probably refuse to put on their account even 100 USD.

Because internet payment is a solved problem. Here's my credit card number, click click.

It works, it's easy enough, and I'm not sure I want it to be any easier.

It's not a solved problem. 66% of the world does not have a bank account (much less a credit card).

However, 90% have access to a cell phone.

That was the basis for my failed micropayments project :)

It didn't fail because of a lack of demand, but because it's hard to tackle without significant resources. I still might resurrect a less ambitious version (being a middleman here in Uruguay).

Ehh, those 66% don't have enough money to be worth selling to anyway.

You obviously haven't had the pleasure of using 3D Secure...

I tend to always use Paypal or Google Checkout (sorry... 'Wallet'...) if given the option as I don't have to fish out my card and go through several screens of slow badly implemented web forms. Often I don't even have to enter my address whilst with a credit/debit card option I always do.

It's not a solved problem on the web merchant side.

the sheer number of possible answers is overwhelming, but pretty much everything Google does fails, except for search and email. (I can't be the only one who's afraid to find out what their cars are like.) so I'm going to say the reason Google Wallet failed is because it was neither search nor email.

I guess you could say Android is only half a failure, because the constant catch-up game they're playing with Apple isn't going as badly as the constant catch-up game Google Plus (and Wave, and whatever they called the other one) plays with Facebook.

but seriously, business failure can happen for so many reasons, it doesn't really mean anything at all, unless of course you see a string of people failing at the same thing.

Woah. Google Wallet failed because they didn't already have accounts for everyone when they launched it. Paypal was the only competitor but they didn't offer anything paypal didn't already offer, and everyone was already on paypal.

> pretty much everything Google does fails, except for search and email.

I can see that you're having some difficulty with google recently, but you can't actually believe this. What about Maps? Saying that maps is search because it has search built in means we can call GMail search too. What about Calendar?

> I guess you could say Android is only half a failure, because the constant catch-up game they're playing with Apple

This is where the snark starts to bother me. Let's acknowledge that Apple made a phone with a big glass touchscreen before Google. What, since then, has been a great innovation that Android has rushed to rip off?

Android half a failure? You must be joking, it's one of their greatest successes. Look around you, for sure you will see at least one person using an android phone.

And what about the ads? They were probably the first company that started making real money with them online.

Google Maps? When I want to find a place I use it, are there any other products that provide a good coverage of almost the whole world (and my little village)?

pretty much everything Google does fails, except for search and email.

AdSense? Youtube?

Also, Google Reader is the leader in its (admittedly small) space. And I'm pretty sure so is Google News. Oh, and Google Maps.

Android is a success. It is the new dominant commodity operating system.

Wave was scraped a while ago and taken completely offline just recently. I loved the per-character live action, but the rest of the UX was non-revolutionary and mostly a disaster.

There is an irony/snark/sarcasm punctuation symbol in English: ⸮

cf. http://en.wikipedia.org/wiki/Irony_punctuation

I'm not sure why, but the mark you posted doesn't work for me, but these work from wikipedia, sarcasm mark: ¡ , irony mark: ؟

Both display fine for me on Chromium on Ubuntu. But on HTC Desire Android phone, I can't see my original, but can see your ones.

Yay! Unicode! Encoding! Fun!

It was proposed to w3c.. kind of http://i.imgur.com/UE85t.png

I think I've posted this before on an older thread, http://en.wikipedia.org/wiki/Emotion_Markup_Language

I think your parent was being meta-sarcastic. You have to keep up with the new forms in the internet.

I thought that was what the blink tag was for...

No we don't. We need less sarcasm on HN.

Yeah but let's be honest. Google's track record is littered with failures that seem more around focus and execution than opportunity.

Google failed at implementing Facebook too.

Why not "Coca Cola Buy" NFC payment chip in every bottle too to be used in restaurants/bars? My mother knows the brand Coca Cola, and if Coca Cola hires 1000 engineers to provide an NFC chip in every bottle; they may get 1% from global.....

Wouldn't this get a bit crowded? For example Coke buy, Pepsi buy, McDonalds buy, etc.

I personally wouldn't want to use a system for payment that would only work for one brand.

Well, Google is also struggling with Social. It doesn't mean that if Google checkout failed no one else can do anything good.

I think the point being made is that simply having a strong brand and bright engineers does not mean you can solve any problem you try to tackle.

that's what happens when you don't fight for what you want. they let others rule the nfc area, what the hell did they think was going to happen.

Are online payments such a big unsolved problem? It takes me all of 10 seconds to type my CC number and associated security codes. Sites that I use a lot tend to allow subsequent purchases without re-entering them anyway.

If everyone's facebook account has CC details attached and a 1 click "pay now" button you are only 1 XSS vulnerability from fraud on an unprecedented scale.

Credit cards suck for many reasons other than just convenience of use. Credit card companies are big cartels with hefty fees to retailers, slow and unpredictable turnaround between when a payment is made, and when it gets to retailers bank, and infrastructure that's not well suited for micro payments, or peer to peer payments.


>Credit card companies are big cartels with hefty fees to retailers, slow and unpredictable turnaround between when a payment is made, and when it gets to retailers bank, and infrastructure that's not well suited for micro payments, or peer to peer payments.

The consumer doesn't give two flying fucks about any of this. This is a very important point.

And as a someone selling something by credit card all over the world (stopped counting at 50 countries about 12 years ago) I also don't give two ff's about any of this.

Sure occasionally we get hit with a chargeback ($30 plus the charge amount) and sure we are powerless and they just added some arbitrary $7 month fee. But without this entire system I wouldn't be in business. I also operated a retail business years ago and accepted credit cards. It was a tremendous improvement over having to extend credit to a business owner and then collecting. The fees were well worth the trouble saved.

I think you're wrong.

Ever had to buy stuff you didn't want to meet a minimum spend on cards? Cause over here many shops have a minimum of £5. And this is why.

Oh yes, the consumer cares, they just blame the shop owner instead of the cartels.

At least in the US, every major credit card has rules against minimum transactions. Reporting a minimum transaction requirement will cause the CC company to investigate the retailer and possibly punish them.

Many small businesses still do it, of course. What keeps people from reporting them is a mixture of not knowing the regulations and wanting the small business to stay afloat. But regardless, minimum payments actually are put in place by the business.

Please see http://blog.visa.com/2010/09/02/minimizing-confusion-over-mi...

Minimums are now allowed on CC

Interesting. I'll admit it's been some time since I checked the regulations. Thanks for the update.

"Ever had to buy stuff you didn't want to meet a minimum spend on cards?"

True story here. Years ago in a retail business we had a $10 minimum for credit card purchases. A customer came in and bought something for like .50c. So the counter person did the charge for $10 and refunded them $9.50 in cash.

>Ever had to buy stuff you didn't want to meet a minimum spend on cards?

On the internet? No.

That because you can't buy inexpensive stuff on the internet. Because of minimum card charges.

Now you know what we're all talking about and can start giving a flying fuck!

I don't think you understand my position:

1. I don't have any pressing need to buy a product at such a low price point, and don't see any need to do this in the future.

2. My credit card works wonderfully, and if a retailer pisses me off, I'll phone them and it'll be reversed no questions asked.

3. Again, I (and most other consumers) already have a solution to buying something online that is almost perfect from my perspective. I have three of them in my wallet sitting with me at this very moment (actually, my wallet is a bit of a problem you could look into, especially in the summer).

I don't need paypal. I don't need pretend currency. I don't trust you to get anywhere near my actual bank account. I have several security options with my credit cards that I'm comfortable with.

I personally don't really care that it costs you x amount to take my credit card as a retailer. I've already factored in all your business costs into my evaluation of the price of your product. I also don't care that your employee demanded a raise last week, you need to buy a new computer or that rent is going up. These are your problems.

Again, do you understand that as a consumer, I view my credit cards as almost the ideal product to conduct business on the internet? You're trying to fix a problem that I just don't have by providing me with a solution that I just don't need.

Oh, OK, I now understand.

So you're making two mistakes:

1. you != everyone else

2. 100 keypresses per transaction[1] != 'ideal solution'

There's plenty of room for disruption in this market still. No-one's asking you to become one of those disruptors and we won't be taking away your credit card. You can keep it. Just like all those people who prefer cash to credit cards can keep their cash.

[1] Card number, SSN, expiration date, address, address line 2, City, County, Postcode. Maybe emailaddress, telephone number. Roughly 100 key presses to enter that lot

It depends if we are talking about FB simply providing a service for taking payments similar to google checkout (using existing Cards) or whether you suggest that they try to replace card altogether.

In order to do that FB would be looking at setting up massive infrastructure and essentially having a "banking division" that would get bogged down in regulations and bureaucracy.

my point is, credit cards suck, and there is plenty of space for alternatives. There is a race in peer to peer and micro-payment space, and currently paypal is the leader, but it is far from perfect. I'm not a big fan of FB, but i think this article is on point, and they are well suited to enter this space. Being able to validate identity (thanks to all the information), and having a brand and cash to back it up. As for the new division, infrastructure, and bureaucracy, it would boil down to how well they can execute.

They would most likely still have to deal with the credit card cartel in one way or another. Simply putting a nice payment front end up doesn't make VISA suck any less.

Another advantage of credit cards is the credit part and it would seem a big stretch for FB to get into the lending game.

I think how well they can execute is only one part of the puzzle, since they are going to have to deal with the governments of multiple jurisdictions and big financial institutions and will basically be at their mercy.

Credit cards are big in the US, maybe, but in the rest of the world not everyone has them.

For the purposes of most online payments a standard debit card can be used interchangeably with a credit card.

"Standard" debit cards aren't really standard outside the US either. Maestro (chip + PIN) doesn't work online, for example.

My VISA (chip + PIN) works without any problems for online purchases. Some sites even transfer me to my bank's payment gateway that sends me an SMS with a number in order to be able to pay.

I don't have a credit card. I know a lot of people who does but rarely uses them, debit cards feel more secure than credit cards against theft/fraud (and I'm not really sure if they are, I don't think so).

Debit cards aren't more secure again fraud. If anything they are less so. Much easier to refund a transaction on a CC.

My VISA ... I don't have a credit card

Visa is a credit card, however. In Europe, it's often tacked onto a regular debit card, but it's a separate thing not everyone has.

You can get "Visa Debit" cards

I'm intrigued. What bank does that?

It's called 3-D Secure. (http://en.wikipedia.org/wiki/SecureCode)

You usually can use a Maestro card online. I think at one point they rolled 2 different cards into the Maestro name which included one for younger people which is supposed not to work online (which would disallow FB payments as well).

In europe certainly most people would seem to have a debit card. Besides I'm assuming at the backend the FB system would require you to enter a debit/credit card.

It would seem very unwise for FB to begin taking down everyone's bank account number as in the case of fraud with a card you can simply cancel the card and get a new number.

But coincidentally is a standard enough debit card that I can use it to pay in stores all over the world. Even the US.

Really? Well, I must be imagining things then. I'll ask the doctor for some special pills and see if the hallucinations go away.

Maybe in the US.

In Brazil, I do not know a single debit card that will allow international purchases, or that will be allowed in Paypal (even though Paypal has a local presence).

Almost every time I use my ccard I get redirected to my bank's website where I have to login. This involves entering two fixed digits (long and tough to remember) and a third token using using a little calculator like device which they supplied me, for which I also need my bank card and its pincode. Once I've passed this step I have to generate another one time token using this little device.

If I want to use my ccard online, away from home I need to have all kinds of codes remembered or written down, my normal bank card and this little device.

Using my ccard online has become quite the pain in the ass.

I wish my bank (well, credit union) offered this.

I don't want to waste those 10 seconds which feel like eternity trying to fill all the fields. That's why amazons "1 click" checkout button is so successful. Make me, the user, do as less work as possible.

It's frustrating how the Google Toolbar solved this problem perfectly 10 years ago, then stopped working consistently.

I should never have to type in a password, credit card number, or address if I don't want to... yet nobody except a few proprietary browser plugin vendors treats this as a problem worth solving.

Opera supports this out of the box since 2003 (according to the version history). It's not perfect in my opinion, but I'd say it's not because the web is broken.


One problem, though, is that banks and merchants tend to flag the credit-card field as "Never autocomplete, even if the user has explicitly requested otherwise."

Any tool that actually solves the problem, at least from my perspective, is going to have to give me the option to ignore whatever security conventions are built into the standard(s).

I think it is reasonable to demand not to autocomplete on the server side. Do they really demand not to autocomplete on the client side? In x-autocompletetype case, all CC information stays in the browser, only thing server does is to mark "this is CC field".

Have you tried 1Password? Its automatic form filler usually works quite well.

It takes me at least 5 minute just finding my cc.

You don't remember your CC details and have to actually get it out? Wow!

Yes and neither does my girlfriend nor my parents. Is that really a common thing? FWIW, I only use my cc every few months.

It may be different for people who have to remember many credit card numbers. For example I know my personal CC number off my head but not any of the cards I use for business.

This is gonna sound crazy, but I wrap mine in a piece of dead animal skin and stick it in my pocket.

Whenever I shop on a site that has the option of typing in my credit card details vs pressing a "Pay with PayPal" button, I always go for the latter, since I'm lazy. Looking at the stats from my job, I'm definitely not alone.

That's kind of my point, Paypal , Google and Amazon all offer quick solutions to online payments. I'm not sure there is really a need for one more.

What might make more sense would be for FB to allow linking a paypal account with a FB account which could then allow users to login to Paypal via FB.

This would mean they could use paypal's more mature backend and let them deal with the messy stuff, while facebook could still potentially get all the fun of spying on your purchases.

For that reason, sites are not allowed to store CVV2 numbers : a user input is always needed.

This thread is interesting in that some people are arguing they wouldn't trust Facebook with their cc. To me this makes no sense as the likelihood of fb doing anything funky with your cc details once obtained seems highly unlikely.

If something does go wrong cc have very good insurance on them. The problem does seem to be a general resentment and paranoia of large companies. I dont think fb are going to cook up a half baked solution for anything like this, there's every likelihood they will do it as securely as the next especially with the strict laws and regulations around implementing such systems.

Everyone with a cc has probably used it in far less secure environments than fb could ever be, for example pubs, bars, resteraunts, independent shops etc.

If fb did a payment system it would annoy me briefly as another payment system I'd inevitably have to register with at some point but that's realistically as far as the problems would go.

It's not about FB deliberately doing something funky with it - it's about one of the million and one apps that have requested access to your FB account at some point doing something funky with it. You may trust them to do it as securely as the next person, but at least partly based on their past reputation around privacy, I don't.

Do you think facebooks payment implementation would be naive enough to allow anything like this?


I don't see a great deal of evidence that they wouldn't.


Just plain silly. People who see a big user base and jump to the conclusion of "payments!" as a future business don't have the slightest clue what they're talking about. Facebook isn't competent at tackling that problem, they don't have the expertise, experience, or relationships.

It makes about as much sense as looking at facebook with their billion users and saying "You know what all these people have in common? They eat food!" And concluding that facebook should become a grocery store.

Payments is a non-trivial business to enter. Paypal has a nearly 15 year headstart, 100 million active accounts and does a tremendous amount of business in a great many countries, yet it is still only a $4 billion a year company.

Facebook's potential advantage in this space is not that they have a billion users, it's that they arbitrate the identity of those users. And payment is inexorably linked with identity, especially WRT avoiding fraud.

Certainly it is a difficult market to enter, but a few billion dollars can buy you a lot of expertise, relationships, and time to build experience.

The reason Facebook should go into transactions is the same reason Willie Sutton robbed banks: "because that's where the money is".

The problem is that it isn't where the money is, not much more money than Facebook is already making anyway. Not unless facebook intends to commit theft. The money today is in selling digital goods which have a near zero transactional cost. Music, movies, games, books, etc. Not that it makes sense for facebook to get into that business either, necessarily.

I don't have the statistics in my hands, but I'm willing to bet that the transaction volume of nondigital goods is at least two orders of magnitude larger than the transaction volume of digital goods. A 1% cut of tens of trillions of dollars worldwide is worth quite a lot more than 30% of a few billions.

Granted, a worldwide payment scheme is a Very Hard Problem To Solve for many nontechnical reasons... but this is exactly the kind of problem that large, ambitious companies with lots of street cred should try to attack. If it was easy, everyone would be doing it.

Real world examples don't bear those numbers out. Look at Visa. 2 billion cardholders, $4 trillion in transactions a year, 80 billion transactions a year. And their revenue is only about twice Facebook's. Unless facebook becomes a merchant bank and convinces millions of merchants to use them they aren't going to see much higher of a per transaction profit margin. The math just doesn't add up.

If the business proposition was simply "make another Visa" then sure, the proposition would be uninteresting.

On the other hand, 2-3% of that $4 trillion is being consumed by the payment processing chain. Only a portion of it goes to Visa; the rest presumably go to banks and other layers of the service. Facebook potentially could, by virtue of being a trusted holder of identity worldwide, subsume all layers of this chain.

Look at it from this perspective: It currently "costs" 2-3% of a transaction to make a CC purchase. That's a huge dead weight loss. Is Facebook capable of using its brand, reach, and identity database to create a more efficient system?

2-3% isn't a dead weight loss, it's paying for very valuable things, especially fraud protection. You can't just magic it away.

Also, as I said, if facebook wants to step into the payments middle man role (which they could) they could maybe make as much as Visa does. If they completely reinvented themselves and turned into a global merchant bank AND managed to convince at least a tenth of all merchant account holders on Earth to switch to them THEN they could make some serious money. But the likelihood of that is precisely zero plus or minus a teeny, tiny margin of error.

In answer to your last question: no, no they are not.

Fraud is a massive problem in the existing payment system only because the architecture is horribly broken. The trust model is completely wrong. Nobody would design this system; we tolerate it only because of inertia, and because merchants are contractually required to hide these fees from customers. There's also an enormous regulatory burden to overcome. I'm not saying there still isn't a fraud issue, but it could be cut to a tenth just by changing the trust model.

My point is that Facebook is in a position to try building a new system, and the payoff is potentially enormous. Having a definition of identity that extends beyond a name and a cc# goes a long ways towards limiting fraud.

However, I tend to agree with you as far as Facebook's technical competence. This doesn't mean they shouldn't try.

As far as the chicken-and-egg problem goes, FB might do well to bootstrap a payments system in lesser-developed nations where Visa & Mastercard don't have such a lock on the market. A truly global payments system stands a good chance of eventually winning.

It's a possible but hardly compelling:

Facebook: ~ 1 billion customers

Visa: ~2 billion cards out there.

Facebook: ? merchants.

Visa: > 10 million merchants.

Facebook: potentially disruptive to the existing market

Visa: 50+ years experience with electronics payments processing, fraud detection, government relations and consumer credit marketing

Facebooks main competitive advantage is(was?) relatively cheap capital.


Edit: Corrected years, added reference

Who works for Visa that Facebook couldn't hire?

Facebook don't have 1 billion customers. They have 1 billion users. If you don't pay for something (Facebook) you are not a customer, you are the product.

It would be very convenient for someone, somewhere, to establish a widely accepted micropayment system for the Internet.

I sure can just whip out the CC, type in the 16 things, the special code, the expiration date, maybe a second screen the CC vendor presents to get my address or phone number for additional verification...

But I would never bother for a 3 or 5 cent article. And I firmly believe that's why there is no way to pay 3 or 5 cents for a view of something.

But there is a lot of cool stuff we could make or do with this. It should just be easy. Why doesn't it exist? There might be a big business answer that my fellows and myself don't get as we rant over coffee.

Micropayments haven't taken off because people don't want to pay 3 to 5 cents for anything. The perception of value is so low that even a one-button form is too much friction in the user experience.

If your article is only worth 3 cents, just show it to me for free and put an ad on the page.

That's patently untrue. Micropayments haven't taken off because it's impossible to make money on transactions less than about fifty cents.

If the transaction processing costs were 0, do you suppose this payment system would still continue to not exist?

I do. I believe the fundamental issue is one of user experience. I think if you force the user to make an affirmative decision to pay every time they want to read an article, a huge number will not bother, even if the cost is negligible. Especially since there will probably be 5 other news sources who are "summarizing" the same content for free, with ads.

There are very few things that are worth 5 cents that you'd get me to pay for that I couldn't just do without.

That wasn't the question; what percentage of the economy is from purchases that fall into the category of "I could do without"?

The question is, the NYTimes article linked on HN with 120 comments... would you pay 5cents to read it?

The decision to buy can definitely be irrational, but that can cut both ways. Buyers might decide against purchasing even when the product is clearly affordable.

Consider the Facebook social reader apps like the Washington Post. If you click through from your Facebook news feed, you need to authorize the app to read the article. It's a one-button form, it's totally free, and you could revoke the app whenever you want. And yet, a huge percentage of people cancel out of it.

Would I pay 5 cents to read a NYTimes article from Hacker News? Maybe yes, maybe no, depends on the article. The point is that I would be forced into my "purchase mindset" every time.

And Facebook already have "Like" buttons all over the web. They could steal Flattr's model in an instant and make it a huge success.

It would be very convenient for someone, somewhere, to establish a widely accepted micropayment system for the Internet.

Google Adsense fills that niche. People who run a website get money from teeny little clicks that their vistors do.

I really don't want that to happen. Sure, it may be a good idea for them, but I'm already tired of services that won't let me register without a Facebook account. When it comes to payment, they better have a good alternative available.

With credit cards we have a number of "hidden alternatives". We've got multiple processors, multiple card companies, etc. It's a number of layers there. With Facebook and Paypal... you're not able to pay when they say you're not able to pay (or be paid). They're not even controlled banks, so there's little you can do about some issues.

Think about all the problems when Google cut someone off and didn't provide any way of contacting them. Do you have a good way to contact Paypal, or Facebook now? (besides forms that result in canned responses) What are the incentives for changing it?

I definitely don't want it to happen either. But from Facebook's standpoint it's not a bad space to start looking at. The reasons you listed above worry me as a consumer, but unfortunately the average user isn't as scrupulous. If FB made paying for things as easy and simple as "liking" something, I'd be very surprised if it wasn't successful.

Right, because the main obstacle to international online payments is having a strong brand.

I'm surprised this got so many upvotes. Does the author really believe that Facebook hasn't thought about this? Or that the ways they make money now are the the only ways they ever will?

I wonder if votes are an expression of interest in the (payments) product.

That aside, I not only assumed Facebook had thought of the idea of payments, they might even be working on it. It seems like an extension of the "Like" button they already have on so many sites.

Certainly Facebook is certainly thinking about new ways to make money, but they did disclose that ads are a risk factor in their S-1, with special concern for increased mobile device use, where they don't currently display ads.

100% spot on, Facebook could see massive profits if it pulls off any or all of the following:

- Upon logging in Facebook lets me know my favourite band is playing in a few weeks, tickets are $25 and I can purchase with one click.

- A new episode of Dexter comes out, Facebook knows I love dexter and thus notifies me and allows me to watch instantly in my browser for just $1.

- A games company (steam, humblebundle, blizzard, whoever) is running a sale on games similar to ones I've already liked on Facebook, I can view and purchase the bundle through Facebook.

All of this is taken care of in one click by my credit card being linked up to Facebook, just like iTunes. They can basically combine the best bits of iTunes + Amazon + All the data they have on everyone on Facebook and build the ultimate relevant shopping directory completely personalized to me.

Sure there are sites that already cater for this but it's about the convenience and instant gratification. 50% of their users log into Facebook daily and won't even bother checking out other sites for these things if they're already right there in front of them available with one click.

They don't even have to do it themselves initially, just hook into Amazon / Ticketmaster / iTunes data and this shouldn't take too long to develop.

This is where the future is and if Facebook does this there's no reason they can't be the most profitable web company in the world.

I reckon most people would quickly turn off this feature after it would produce more than a few bad predictions/recommendations in a row.

People wont be able to turn it off unless they install adblock.

I think that "be a payment provider" is a much easier thing to think than it is to do.

While it may be easy to build the customer side of the equation you've got to build a vast network of merchants willing to accept payment and that's hard work. Especially if you're trying to convince them to re-price in Facebook Credits?

Sure, you could charge 1% but people have added credits to their Facebook account at some point and it probably cost you more than 1% to allow them to do that. How do people buy credits right now? All those cost Facebook more than 1%, right? I buy $100 of credits, it costs F8 a couple of bucks, I then spend $100 of credits and they recoup $1 of it in merchant fees? Doesn't sound like a good business model.

Beyond the need to create a financial model that makes sense and then go out to find merchants and convince them there's a massive risk of merchant fraud.

Fraudulent merchant X signs up for a F8 Merchant Account. Fraudulent customers A, B, C buy something with stolen credit cards for $100 each. Everyone disappears after merchant X receives settlement. F8 is out of pocket to the tune of the original $300, another $300 in reversals to their bank and then $30-$60 of chargeback fees. If that happens enough then F8 might even have its merchant account revoked... though they're probably big enough to avoid that.

It's an excellent money laundering channel too and there's a lot of financial regulation to navigate around that.

I know that this stuff can be overcome but it is hard to do and would be a major piece of work. This type of thing nearly sank PayPal back in the day.

Perhaps I'm missing the point here though?

Well there's interesting ways to do that with Facebook though. A la you can't start selling large amounts of goods unless you have x number of likes on your page. Same thing, on the user side. You can only buy $10 worth of credits if you have a new account, accounts can be flagged, etc. I agree it's a pain in the ass to do, and much easier said than done. But it's definitely doable and hugely profitable. They can easily take more than $1 in merchant fees, and credit card companies will beg them for their business and give them great rates. Shoot, they can do a Visa or Mastercard exclusive and get even better rates at the beginning.

There are reasons for and against pursuing this particular niche, but I think Boris is really onto something. Selling ads is a safe bet, but FB really could wager a billion dollar fee to enter a new market. There must be markets where entering the field with a billion signed up users and a billion in capital will work, even if this isn't the perfect example.

The second biggest social network in The Netherlands (Hyves) introduced something like this in 2010. They mainly intended it to be used to pay back (small) debts to friends or relatives, but also made partnerships that enabled you to order food online or order drinks at a bar.

As far as I know, it did not really lift off, but this could be because Facebook overtook Hyves as the most popular social network shortly afterwards.

Facebook has demonstrated a completely utter disdain for interacting with their users. If something goes wrong with your "friend wall" or whatever, it's an inconvenience. If something goes wrong with your money, you want to talk to a human. Everyone knows you can't reach fb humans. When it's money, that matters. The work involved in turning that perception around is a huge hurdle to this idea.

The whole approach of Facebook at its core is a disdain for the users, because Facebook profits from users' profiles. They can argue that users are willing to trade off their privacy for the "free" service, but it's just a sneaky way to get users information to monetize on. Given that, why do you think they should have more respect in other kind of interactions?

There are lots of reasons they /should/ have more respect. But my whole point was that I don't think they ever /will/. Putting a high touch endeavor like financial dealings on top of a no touch venture like a social network is dumb. Basically, looks like you and I agree.

Yes, we agree. Really Facebook is not fitting to be a social network, but at the same time it has such a huge number of users at the moment. Hopefully real social networks like Diaspora which are built for social interactions and not for ripping users off on their privacy, will eventually gain more traction.

You inspired me to write a little blog post. http://www.sherrod.im/81/just-give-them-their-money/

Commented there.

Aside from the points the author makes, this would also improve Facebook's advertising model a lot. They would have purchasing information from basically every segment/product/niche/market out there.

You put an ad on Facebook. People click on it an buy with FB-pay. You then get a ton of marketing data to better aim your ads. Tine of purchase, day, credit card type, marital status (confirmed versus Fb status), income information, billing address, etc.

All in one convenient place. How much would businesses pay for that? A lot. Evidence? Call your local mailing list broker and ask for a quote.

Of course, this will set off what I call "the privacy wars". Where the government will step in after some single mother of three is scammed and the story is picked up by some mommy-blogger who then sells the story to the huffington post, who then sells the article to CNN, who then puts it on TV. Then FOX makes a deal out of it, republicans notice, and make some lobbyist-impregnated bill that includes the "single-mommy law for online privacy".

But, we've had this coming for a while.

This makes very good sense to me: CC payments are expensive (up to several percent), merchant accounts are difficult to come by, accepting international cards is annoying.

This is partly because of the fraud risk, partly because of VISA and MasterCard's duopoly. Facebook is pretty well situated to deal with both IMO.

And it's not just online payments: The current state-of-the-art in mobile-phone POS payments ("It's exactly like a credit-card! Except it's in your phone!") seems like a dead-end to me. Facebook is in a unique position to move into this area.

These articles make me wonder why everyone with a blog thinks they know better than the massive teams of engineers running these companies...

Do you really think Facebook doesn't have reams of data and analysis on this exact idea? I bet they've been analyzing the crap out of it for years and for whatever very good reason they have they haven't done it yet.

Now, I predict the company who will make a trillion on payments is Apple. They're set up quite nicely to tell the credit card companies to take a hike.

Dammit, then I'd have to reactivate my Facebook account.

And then Facebook would know everything I buy.

What if I refuse to use facebook, would be unable to pay?

It's in a companies interest to make sure that there is a way to give them money, they are unlikely to want to throw away good customers just because they don't have a FB account.

What I would expect to see however is discounts offered if you use FB payments and allow your purchases to be automatically shared with your friends.

    allow your purchases to be automatically shared with your friends.
This is one of the creepiest feature one can get. I already hate these social readers which automatically share what you read (I've stop reading stuff on FB because of that, even if many of them are of my interest). However I'm hoping they would provide some reasonable privacy options with that.

I don't imagine it would become compulsory. After all people need an avenue to buy their porno and health related products in privacy.

You would get something like "10% off for you and 5% off for all of your friends, if you allow us to repost on your wall"

The problem of course becomes spam, if FB ever gets to such a poor signal/noise ratio then people will simply stop using it.

Too late, I think.

Facebook has scared off a lot of the "moms" out there by their bad bad bad privacy history. Do you really want to pay for things using their service?

I'm pretty sure my mom has no issues with Facebook's privacy history.

My mom is a lot more worried about seeing pictures of relatives she doesn't like than about privacy.

Maybe the subset of moms that frequents reddit and HN.

Your average suburban mom out there know nothing of Facebook's tussles with user privacy.

While I tend to agree, they could throw in an RSA fob or a smartphone-based two-factor equivalent.

They probably should already.

I like two-factor authentication too, but casual users don't care about this sort of thing until it's too late.

There's a large and growing number of casual users who've dealt with or watched a friend or family member deal with fraudulent charges.

I think a sufficiently streamlined phone app and pitch could net quite a few. Say, demonstrating the feature by showing someone making an Amazon purchase and then getting a phone notification to approve the charge and approving with a simple PIN entry.[1]

[1] Said notification ideally showing merchant, amount, scan location, warnings if it's a card not present transaction, etc.

It's worked well for Walmart (well, okay, aside from the whole "bribing people in Mexico" thing.) But people seem willing, and even eager, to bank with companies they know and trust.

The real problem is regulation. It is so, so much easier to sell ads than to navigate the international financial markets.

> People will think twice about losing their ‘Facebook Credit Score’ over a few $ for an online presence they spent (literally) years building and cultivating.

Which keeps them from using that hypothetical service, because they don't want to risk losing the account over a transaction that went wrong.

Or maybe not. Who knows?

Seriously? Linking your checking account with Facebook?

It would definitely be the next step in user lock-in, but you'd start competing with banks and everyone else who offers a way to pay.

Now, I wouldn't complain if they bought some "bypass the credit card companies" service like Dwolla...

>"bypass the credit card companies"

I have both an American Express and a Visa (because Amex just isn't accepted some places). The customer service has been nothing but amazing, even when dealing fraudulent charges. And the cards are accepted everywhere.

What I'm saying is, I don't feel any need whatsoever to bypass my credit card company to pass my information off to a start up.

With 1/6th of the world population Facebook can very well release it own currency.

I think FB does not have to be a PayPal, and there are many good reasons outlined in these comments already why that is a bad idea.

However, it can become some kind of market place. It already knows user locality, it already has people flocking to it. It already has big brand stores sharing discounts and coupons to consumers.

All it needs to do is finish the last mile and allow those brands to actually have a "Facebook-only Sale", for example.

Also, it can become a great "local market place", and can help local businesses to sell to local customers.

TLDR: not just ads, and not necessarily a payment gateway, but a niche market place could be it.

I wouldn't trust or use something like this.

1) I don't trust Facebook to transact payments quickly or safely.

2) I don't want Facebook to take my money. I'm guessing Facebook would capitalize on this by exacting a higher rate than other options. Because they can. I want the max amount of money to go to the creators of a product, not to Facebook.

3) As it says, Facebook already knows everything about people. Should they really have access to our credit cards as well?

I fully agree. For a lot of people facebook is their identity, linking their identity to paiement is a logical step.

They could first allow people to exchange any amount of money with friends for free, add it to their mobile app so that everyone has it anytime. Other apps are doing that, and that's very useful.

And they should buy Stripe, bind everything together, displace amex, visa and mastercard.

Or may be that's the plan, but it's best to be silent ?

I always thought this would be Apple's next plan as well. "Pay with your Itunes account" or something like that.

That doesn't seems very Apple like move, they don't like to mess with ugly systems and integrate their products with anyone.

They have a good place to do that, but I doubt that they'll go that way.

But Steve isn't there, and Apple moves might be unexpected.

Its not possible to solve for everyone, the whole of web-communities !

Nerds and Geeks never trust facebook, but their moms and sisters do !

I heard through some friends that Swedish start-up Klarna is actually using your Facebook profile to evaluate probability that you are a real person. If you pay online using an e-mail address that has lots of friends on Facebook then the overall risk of the transaction is considered lower.

I agree with most of this article, except, if I was Facebook I would bill via the mobile networks.

Not really viable on the desktop, but certainly on phones.

There's no reason that I can think of why I can't be identified by my own mobile network and either charged at the end of the month or via my airtime.

Well, it would be GREAT also on mobile! All my friends have Facebook, if I could pay them with my phone and only their name I would do it all the time. (Like what PayPal tries to do, but there is not enough adoption)

Why not buying RIM and make a serious move into the smartphone market. Last time I checked RIM's market capitalization is a bit over $5bn and Facebook has tons of money in their pockets after the IPO.

I commented on another submission that was similar to this. http://news.ycombinator.com/item?id=4040519

You know you don't actually have to click an ad for FB to make money? Companies pay money just to get that ad in front so many eye balls!

There is no way facebook has a billion active users. Official numbers are always very optimistic.

For example, a lot of brands and agencies register many,many pages on facebook, and even post content there. And Britney Spears is not really on Facebook, she just has someone have post stuff for her.

I'm sure Facebook is huge. But if they say a billion, it is probably closer to 500m.

> To fight the money game you need extremely deep pockets.

Not really. You just need different kind of priorities. For example Diaspora challenges Facebook on the grounds where FB is the weakest - privacy. Facebook can't compete on privacy no matter how hard they try (and they simply won't even try since the whole FB is built on selling off privacy).

I can't take this article seriously because it's so terribly written.

why stop at credit card processing how about a Facebook Credit Card !

Cannot tell if serious. If so: a credit card would be picked up by a tiny number of people worldwide in comparison to the numbers who would use a "pay with Facebook" button, and the latter is already an area of expertise for Facebook (or at worst a logical extension of their current expertise).

They're already giving out those to white-hat hackers btw..

Had a similar idea for this - We'll probably play around with this at Kout as soon as we've sorted out our payments infrastructure - Here's a mockup I made a little while back using Twitter - http://bit.ly/Kd0ugW

= Inital Idea = You're perpetually logged into a social network, why not pair up a payment method and leverage that connection. Always be connected to a payment method/global checkout - authorised by a 4 digit pin.

There's an array of pro's as cons for this.

= Issues for Facebook (and Twitter) =

The hurdles to get setup as a Payment Service Provider, and have the capability to preform cross-border, cross-country transactions, dealing with multiple currencies, as well as boarding merchants outside of the US, is a complete bitch.

It would be completely out of Facebook's internal focus to build and maintain this - outsourcing/partnering is a different story.

= Facebook's Cut =

Facebook takes a 1/3 cut from developers for FB Credits. They can't take a 1/3 cut from credit card processing.

They'll realistically take 2.75 - 3.5% and that would just piss off their developers who are being charged a 1/3, unless FB reduce their 1/3 cut - which I doubt they'd do.

Facebook would (probably) make more cash using FB Credits than processing credit cards - The margins are rediculously low with card processing (varies on card type) - It's game of volume.

Unless you're PayPal who charge you 2/3% for sending money between PayPal accounts. When all they're doing is ACH transfers between "dynamic bank accounts" they've setup, which costs them under 5 cents to preform.

= The trust factor = with Facebook (Guy/Girl's in Social Commerce take notice here).

Consumer's/Users whatever you want to call them simply would not trust Facebook with their super sensitive data (Credit Card & Billing Information). They don't have the best reputation when it comes to users data.

They might experience some success and sign up a few tech savy users - but ultimately - even if they sort out all of the technical & logistical issues they will constantly face this one.

This is why social commerce isn't full circle, or shouldnt be. When was the last time you entered your credit card details into a Facebook app? would you?

Social Commerce is really the discovery of products, but when it comes to facilitating the transaction, consumers need to be out of the ecosystem where "public" data is flowing, their friends are talking to them, or irrelevant social data is distracting them.

Consumers feel incredibily uncomfortable entering sensetive data into a platform which they use with the mindset of "sharing".

Unless of course it could be masked under a "Pay by Facebook" option which doesnt require the user to type in and sesntive information - ha.

Those are just my thoughts, and of course you have risk, disputes, charge backs, being the ultimate target for russian hackers etc.

I could be completly wrong, but I think a third party needs to step in here.

Facebook and a Dwolla/GoCardless partnership - now that would be intresting - you can fake a credit card but you cant fake a bank account.

$10 billion? I don't think so.

VISA: $3.36 billion profit | DFS: $2.2 billion profit | AXP: $4.9 billion profit | MA: $1.9 billion profit

That's Visa, Discover, American Express, and MasterCard.

That's a $12.4 billion profit, if you take every aspect of all their businesses away from them across the board and basically acquire a complete monopoly in transactions. Their businesses go far beyond processing of course, so you'd really need to not only take over all transaction processing but then double the business.

Facebook processing payments is maybe a billion profit opportunity for them. Not chump change, but very far away from $10 billion.

Revenue is multiples of those numbers though. Because Visa manages to have insanely bloated overhead doesn't mean Facebook would.

I agree that Facebook could try to be less bloated, however that's not very likely. The history of tech companies is gradual bloat, whether you're talking about Microsoft or Google or Apple.

Visa has a $80 billion market cap, $9b in sales, and $3.6b in profit with a mere 7,500 employees. One of the best ratios of any major company. In fact, it's better than Facebook's current employee to sales ratio (and it's worth pointing out that they're nearly at a $10b sales run rate, and $4b in annual profit).

Visa has around a 40% net margin, that's beyond extraordinary. There's almost zero chance Facebook can be any less bloated than what Visa is already doing.

Discover also has a stellar ratio, 11k employees to $8.5 billion in sales.

Ditto MasterCard, with 6,700 employees and $6.7b in sales.

The only reason these companies have such high margins is because these businesses are unbelievably profitable. Being the guy who takes money from someone, puts some of it in his pocket, and hands the rest to another guy is a very very sweet place to be.

I think Facebook could tack on a payments business with relatively little additional hiring or resources, and maintain far higher than 40% margins. Whether they would try to be that efficient or not is another question.

Most tech companies don't bother with being particularly efficient. Google could have stuck to their search engine and advertising and had > 80% margins if they wanted to.

You're absolutely right, payment processing is incredibly profitable, but I don't see what that has to do with Facebook attempting to be even more efficient than Visa.

Facebook has already shown they're not even as efficient as Visa; despite being so young they're more bloated than Visa already. And that lends credence to the notion that they wouldn't be any better at payment processing than a company that has specialized in that for a very long time and is the best in the world at it.

Certainly a company like Microsoft could have just published Windows and had 90% margins. But no mega company ever does that, so it's not a realistic scenario. They don't do that because they're seeking growth, which is something shareholders always want to see.

Companies that had extremely lucrative margins and dominant positions, that didn't sit still: Cisco, Microsoft, Apple, IBM, Intel, Oracle, Samsung, Nintendo, Sony, Google, and on and on.

I've not aware of any major tech company that has ever just created one extraordinarily profitable product, and then did nothing else but collect their 85% net margin. Facebook isn't likely going to be the first.

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