Facebook is planning to offer banking services to its users, The Financial Times has reported this week.
The move would allow the social network to compete with the likes of Western Union, while giving users the option of storing money with the social network or buying items online.
The US tech firm is seeking regulatory approval in its European base in Ireland for “e-money” status, which would see it issue digital credits that can be converted into cash by recipients.
The firm already has permission for some forms of money transfer in the US, which allow payments within apps, including the Candy Crush Saga and Farmville games, from which Facebook takes a 30% cut.
The company facilitated $2.1bn (£1.3bn) in transactions across Facebook in 2013, primarily to games publishers.
Approval in Ireland would allow Facebook to operate an e-money service throughout Europe using “passporting”, which allows digital payments to be used across EU member states without having to gain regulatory approval from each one.
It follows the social network’s attempted acquisition of Titan Aerospace, now purchased by Google, a company that manufactures high-altitude drones, as part of the technology giant’s efforts to bring the internet to remote parts of the world.
Facebook declined to comment on the development.
Taking on the banking giants
Steve Edkins, CEO, FusionExperience, discusses Facebook comments on Facebook readying itself to provide financial services in the form of remittances and electronic money: “Facebook’s decision to enter the financial services realm highlights how traditional financial service providers are facing a growing threat from digital giants.
“The popularity of smartphone devices has aided the shift in the financial services market by allowing companies like Facebook, Google, Apple, Microsoft and Amazon to act as intermediaries and pioneer stored monetary value. While this evolution has been in progress for some time now, banks are increasingly under threat of being bypassed as digital companies use stored monetary value as a ‘living current account’. It is now only a question of time before the banking industry reaches a tipping point where the redistribution of cash liquidity materially impacts banking as we know it today.”
Watch this video from Bloomberg discussing Facebook’s latest venture here: