Money transfers Facebook-style may extract a high data price

Facebook users will now be able to send money to their friends using its Messenger app.

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facebook

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Hang on, does this mean Facebook is becoming a bank?

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Not quite. It’s becoming a money transmitter and only between non-commercial entities. Facebook won’t actually be taking deposits and re-lending the capital like banks do — just matching payments between respective parties that are already plugged in to its messaging network. It will still depend on the underlying banking network to process transactions to itself from your accounts.

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So it’s a bolt-on application?

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Kind of. Facebook has basically identified that because it’s a common intermediary between many people it can debit and credit people’s respective accounts in a way that mimics payment flow.

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So how does it work?

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You give Facebook your debit or credit card details. It sets up a charge account associated with your identity on their network and await payment instructions from you.

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When you wish to send a payment to a friend you tell Facebook how much to debit your account and to whom to send the credit. If the recipient’s bank account details are not known to Facebook, the recipient receives a message alerting them to retrieve funds by providing payment details.

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Ah! So it’s like an iTunes for payments.

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Precisely. The difference is that instead of being charged for downloads you get charged the amount you want to transfer. Your friend, meanwhile, sees a credit appear from Facebook. Facebook only acts as a custodian for as long the funds remain unclaimed.

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But am I right in thinking this involves us trusting Facebook with our details?

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No more than we already trust businesses to which we give our bank account details for repeat payments. Your bank still provides you with the usual protections.

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If Facebook was to debit your account stealthily without your consent you could claim fraud in the usual way, in line with consumer protection practice. You can also block Facebook’s access to your account at any point.

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This sounds an awful lot like PayPal to be honest.

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It’s not dissimilar. Except, PayPal’s business model has traditionally been focused on encouraging people to keep a money float on their system. No such float is necessary with Facebook.

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What if I want to send payments to another network?

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For now it’s a Facebook-dedicated application. But there are other technology and social media companies providing expanded services that cross networks and which cater for commercial entities. Google launched an email payment service this year. With that system, once you provide the company with your payment details, you can instruct it to transfer funds to anyone with an email address, irrespective of the network. The recipient will simply receive a message saying Google has a credit for them if and when they provide it with their bank account details. Apple’s new payment service will transmit payments to any registered vendor on its network.

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Isn’t there a risk that fraudsters will try to imitate emails about payments to get your credit card details?

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Those perpetuating online phishing scams are certainly very creative. Let’s hope service providers have anticipated those risks.

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And how much does it all cost?

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That’s the interesting thing. For now, in most cases, the services are being offered for free, at least to non- commercial users.

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There must be a catch.

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It probably pays to read the terms and conditions about the sort of data these companies will be collecting about you and how they will be using it. Information about people’s spending habits is, after all, among the most personal in the world but it is also among the most valuable to the social media companies that derive most of their revenues from advertising.

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Absolutely right. If I knew my bank was passing on my spending details to advertisers to pitch me products, I’d be outraged.

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That’s why it’s important to read the small print closely before sending payments through any of these networks. Facebook Payments, for example, promises it won’t share your personal information without your explicit consent. The terms at Google Payment, meanwhile, state that personal information will be shared with Google affiliates (who operate in the advertising space) unless the user opts out by adjusting their privacy settings. So the onus is on you.

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It’s a brave new world when advertisers and marketers can peer straight into your payment history.

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You don’t say. – Financial Times

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