According to the Financial Times this morning, Facebook is “only weeks away” from establishing itself as a mobile money service in Europe, with an eye to taking on the likes of M-PESA in the developing world. The firm is apparently in talks with the Bank of Ireland to obtain authorisation to process transactions, and a source is quoted in the article as saying that “Facebook wants to become a utility in the developing world, and remittances are a gateway drug to financial inclusion”.
It goes without saying that Facebook is huge in South Africa, surpassing local hero Mxit as the most popular social network in the country with 9.4million active users last year, according to the South African Social Media Landscape Report 2014 by World Wide Worx. Mobile money – paying for stuff with your phone – hasn’t taken off quite so well. M-PESA, the Vodacom-backed system for transferring money from phone to phone, is huge in Tanzania and Kenya (keep an eye out for operator Safaricom’s financials next month to find out how big) yet has just been closed down in South Africa.
That’s not to say there’s no appetite for mobile money: according to ABSA, R10bn has flowed through its smartphone since it launched 10 months ago, but by definition that will be relatively high earners. There’s no analogy to M-PESA here to opening up banking services to the poor – according to more World Wide Worx stats – the 2014 Mobilty Report – less than one in ten people have used a mobile phone to transfer money to someone else. When we’ve looked at this issue in the past, it’s been down to lack of trust and the high cost of transferring money either from bank account to bank account.
It’s not for want of trying either. All the banks have mobile money services, the problem is that there’s no one, simple way that has become the standard. And that’s where Facebook comes in. Sending money via a banking app is tedious and long-winded even if you can remember what the name of the service is today (Geopayments? Seriously FNB?). But Facebooking R50 to a mate to pay for something just by tapping their name? It’s hard to see how that wouldn’t catch on.
For me, the idea of paying through stuff through Facebook is terrifying. I try to avoid the Zuckerberg information vortex as much as possible, and giving Facebook access to my spending record is as appealing as painting my credit card number and CVC code onto the side of my car and cruising the ringroads until I run out of gas.
On the other hand, realistic competition from a rank outsider would go a long way to breaking the banking cartel that keeps the cost of financial services ludicrously high here. When I moved from the UK, the first piece of real culture shock was being asked to pay a monthly fee for a regular chequing account, along with R3 here and there for things like SMS notifications. I can’t remember the last time before that I paid for even an ATM withdrawal.
So perhaps there is room, and arguably a need, for Facebook in South Africa. There’s certainly a huge PayPal-shaped hole it would fill for online purchases, at the very least. Then again, the argument may well be academic: as much as Facebook has aspirations for the developing world getting a service like this launched with South Africa’s exchange controls and banking regulations in place seems unlikely, to say the least.