Facebook to Test Its Own PayPal Competitor in Bid to Simplify Mobile Purchases
Facebook plans to test a new payments product that would allow online shoppers to make purchases on mobile apps using their Facebook login information, according to sources familiar with the company's plans.
Context & Ripple Effects
Facebook has been probing payments beyond its own properties for years: it outlined a developer payments test in 2009, accepted PayPal for ads and Credits in 2010, and later tested Facebook Credits on third-party websites. The reported mobile test would apply that payment ambition to purchases made in other apps, using Facebook’s login as the entry point.
The report is unconfirmed, but its wide pickup reflects why the proposal matters: Facebook’s mobile Pages had just gained features such as OpenTable reservations, giving the company another reason to make mobile business interactions more transactional.
First-order effects
- If Facebook conducts the reported test, shoppers can use Facebook login information at participating mobile-app checkouts rather than creating a separate merchant account.
- Participating merchants gain a potentially lower-friction checkout path, while Facebook becomes more directly involved in the purchase flow than it was through ads or Credits.
Second-order effects
- PayPal faces a new checkout rival whose starting advantage is a login already used across third-party apps; merchants will weigh that convenience against reliance on Facebook’s identity layer.
- Developers that previously treated Facebook primarily as a distribution and login channel may have to integrate payment flows as well, concentrating more of the customer journey with Facebook.
Third-order effects
- If Facebook can extend identity-based checkout beyond a test, social platforms may compete for commerce control through the account layer, not only through advertising or virtual-currency systems.
- That model would make merchant access to a platform’s logged-in audience a more important bargaining point, while increasing the value of the platform’s mobile product integrations.
The trend: Consumer platforms are seeking to turn widely used identity systems into mobile-commerce infrastructure, linking discovery, login, and checkout more tightly.