Facebook Developing Mobile Payment Future

There’s no doubt that Facebook is developing a Web payment platform to rival those of Google, Amazon and eBay (PayPal). But Facebook may also be looking to crack one of the biggest nuts in the online payment world, which is mobile. Facebook spokesperson Kathleen Loughlin confirmed reports that the social networking site has hired Prashant Fuloria, a former Google employee who worked on Google Checkout; given Facebook’s obvious focus on mobile Web applications, Fuloria’s direction is clear.

The principal roadblock to facilitating mobile payments is the mobile carriers themselves. In order to charge customers, sites can pick from two equally deadly poisons: allow customers to charge products or services to their wireless bill, which is transparent and easy but costs the vendor close to 30 percent of the transaction price; or else they have to ask customers to pick a payment method like a credit card or a PayPal or Google Checkout account. Mark Curtis, CEO of dating and social networking site Flirtomatic, told me that the size of transaction fees collected by carriers means he can’t sell real goods unless customers don’t know what the price ought to be. Men might be willing to pay 30 percent above market rates to send flowers to a new girlfriend, but that’s about it. The other poison — using a payment system — stops the transaction cold, unless customers have already used it on their mobile devices on this particular site.

This is where Facebook’s payment platform comes in. Facebook has over 200 million active users (people who have visited at least once in the past 30 days), which means the odds are very great that a mobile user will already have an account. And Facebook has established a close relationship with its base — a relationship tempered by the heat of what can only be described as lovers’ quarrels over basic issues of trust and privacy. I have absolutely no problem imagining that its members will trust Facebook with a payment platform that they can then use to pay for goods sold by vendors across the Web using Facebook Connect, which is used by members to “combine their Facebook experience with any participating Website, desktop application or mobile device.”

Note that even back in December, Facebook’s release emphasized the mobile aspect of the feature. Despite the many roadblocks, customers have demonstrated a greater willingness to pay for products and services using mobile devices than traditional Web-surfing devices, Curtis of Flirtomatic told me. And where Facebook is concerned, he agreed that “mobility is a critical part of what they’re looking at.”

One more indication of the importance Facebook places on mobile: the fourth person on the company’s organizational chart, after CEO Mark Zuckerberg, and ahead of COO Sheryl Sandberg, is Chamath Palihapitiya, the company’s vice president of growth, mobile and international.

Despite its size, or perhaps because of it — and how it got to be so big — Google hasn’t come close to establishing the kind of stranglehold on payment systems that it has on search; PayPal is painful for vendors and customers alike, which explains why it hasn’t caught on despite being the only obvious choice for so many years, and Amazon hasn’t given anyone a compelling reason to sign up unless they’re buying directly from Amazon. Facebook has a massive user base and a compelling reason to sign up; that it hasn’t rushed a payment system to market shows how important it believes this to its future. And unlike Beacon or design issues, this isn’t something that members will forgive and forget if the site gets it wrong the first time.