Facebook May Challenge PayPal With Its Own Mobile Payment System

Facebook wants to make it easier for you to make payments on your phone.

ByABC News
August 15, 2013, 12:17 PM
Facebook's credit card page.
Facebook's credit card page.
Joanna Stern/ABC News

Aug. 15, 2013 — -- Soon you might be able to sign in with your Facebook account and not only start liking but shopping. The social network confirmed today to ABC News it is testing its own mobile payment platform.

First reported by AllThingsD, Facebook would partner with current shopping apps and allow users to pay for things just by putting in their Facebook username and password.

"We are working on a very small test that lets people populate their payment information already on file with Facebook into the checkout form of a mobile phone app when they are making a purchase," Facebook's Tera Randall told ABC News. "The app then uses their existing payments processor to complete the transaction. The test makes it easier and faster for people to make a purchase in a mobile app by simply pre-populating your payment information."

To use the service shoppers would already have had to previously save their credit or debit card information with Facebook. Currently, Facebook's Gifts service asks for a user's credit card information to send gifts to other users through the social network. Users also input their credit card when making in-game purchases, for example, in games such as Farmville.

According to AllThingsD, Facebook is already testing the service with JackThreads, a shopping site for men that sees a lot of its sales through mobile phones. Facebook told ABC News that it will be testing the program with just one to two partners to start.

The service sounds a lot like PayPal, the third-party payment platform which allows users to simply pay through a website without having to input their credit card every time they make a purchase. However, experts say that Facebook will have a hard time gaining the user base and traction of an established player like PayPal, notably because Facebook stands for social, rather than shopping.

"The user will face this with a lot of trepidation. A lot of people will think social and sharing -- two things many don't want to have associated with their credit card and payments," Chris Silva, a mobile analyst at the Altimeter Group, told ABC News. "That is something that will have to be overcome."

Silva also points out that Facebook doesn't see much in terms of direct payments right now. During its last quarter earnings, Facebook reported that it made $214 million through direct payments and fees, which includes software developer payments and fees to the company. That's a relatively small sliver of the company's $1.8 billion in earnings.

However, to Facebook the platform could also boost advertising value -- the idea being that if people are able to pay directly through the platform, brands would want to push advertising harder on Facebook.

"It could be a great deal for retailers," Silva said. "It pulls down the barrier of the complicated process of sign in and payments."

Facebook says that it will be working with its shopping partners to surface the payment test with a select number of users soon.