Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

Industry Perception, Optical Delusion

January 14, 2013
/   Insights

In Washington, they talk a lot about ‘optics.’ This has nothing to do with regulatory scrutiny, or government mandates on eyeglasses. It has to do with perception—how something looks, the way a particular story...

Social Banking: Blessing or Curse?

August 1, 2012
/   Insights

While the topic of Facebook and banking has generated plenty of heat (though not necessarily a lot of light), the debate seems mostly focused on two broad issues: The much-maligned IPO, and the notion...

Mobile Banking Engagement: Data from Digital Insight

June 24, 2013
/   Spotlight

Intuit Financial Services has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several...

While Google’s privacy policy and user-tracking have been under the microscope recently, Facebook has been quietly acquiring money transmitter licenses from state agencies around the U.S.

Is Facebook gearing up to battle PayPal and the ever-growing list of companies in the payments space? Are they just preparing for the increased scrutiny that going public will bring? Or, perhaps they plan to revolutionize the financial service industry with their more than 845 million users worldwide?

The point is no one really knows.

A recent article in American Banker shined a light on the social network’s recent activity with state regulators, confirming at least 15 states have granted money transmitter licenses to Facebook. Facebook already maintains a digital currency, Facebook Credits, for use with Zynga’s Farmville and some of its other online games. Point being: Facebook is well positioned to provide person-to-person (P-to-P) money transfers with real-world currency.

What would a Facebook-based financial institution look like?

Well a lot like PayPal actually, but with more traffic – people updating their status, posting pictures, checking up on friends, etc. P-to-P transfers seem a natural fit. Banks have begun to offer P-to-P and need to take Facebook seriously as a competitor. Bank transfers can be as easy and convenient as simply entering the recipient’s email address and the amount to be transferred. If you are already logged in to Facebook, it could only take several clicks, eliminating the need to switch to a bank’s site or PayPal.

Currently, advertising space is the only product sold by Facebook. It stands to reason Mr. Zuckerberg and company would jump at the chance to squeeze more revenue from his website’s users. Taking a small percentage of the P-to-P transfers would generate additional revenue.

Facebook collects information about users, their preferences and activities on their site, giving them a huge advantage over other FIs. Only Google comes as close to compiling as much user information.

The popularity of the payment space continues to surge with a seemingly never-ending line of companies ready to compete for a piece of the market. Case in point: Retailers Walmart and Target recently announced that they, too, will soon launch a mobile payment system. Starbucks and Subway launched mobile payment solutions last year.

Retailers like to provide payment solutions because it enables them to offer special deals to customers, avoid paying costly transaction fees to FIs, and provide greater security than a multiple vendor system. Perhaps most important is the additional information about each consumer, which can be culled and analyzed in order to maximize sales from each individual and thus increasing the retailer’s revenue.

Questions remain about if and how Facebook would handle basic banking functions like deposits, interest, and fees, but FIs would be wise to prepare for competition from yet another company.

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp