I was surprised to hear that Facebook had obtained an electronic money licence, but only because it had taken so long for them to do it.
A couple of years ago my son was, as is rather the fashion with teenagers, in a band. With some friends of his, he arranged a “gig” (as I believe they are called) and a local venue. There were five bands involved and the paying public arrived in droves, ensuring a good time was had by all. All of this was arranged through Facebook. All of the organisation and all of the coordination was efficient and effective so that the youngsters were able to self-organise in an impressive way. Everything worked perfectly. Except the payments.
When it came to reckoning up the gig wonga, we we had a couple of weeks worth of “can you send PayPal to Simon’s dad” and “he gave me a cheque what I do with it?” and “Andy paid me in cash but I need to send it to Steve“ and so on. Some of them had bank accounts, some of them didn’t. Some of them had bank accounts that you could use online and others didn’t. Some of them had mobile payments of one form or another and others didn’t. I can remember that at one point my son turned to me and asked “why can’t just send them the money on Facebook?”.
I didn’t have a good answer to this, since I thought sending the money through Facebook would be an extremely good idea and I can remember discussing with some clients at the time what sort of services they might be able to offer to Facebook or other social networks that were empowered through an Electronic Money Issuing (ELMI) license and Payments Institution (PI) licence. As a fairly typical parent I would be much happier to use my credit card to load UKP20 onto a Facebook account that I could send to the kids for them to use online rather than give them my credit card details or allow them to use their own debit card details online. Hence I wasn’t at all surprised to read that:
Facebook is reportedly “only weeks away” from receiving regulatory approval as an e-money provider in Ireland, authorisation that would be valid throughout the European Union. Users in European countries could use Facebook accounts on their smartphones to send money home to friends and family in emerging markets.[From Facebook plans mobile money serviceMobile World Live]
I remember writing a couple of years ago that I thought Facebook money could easily become the biggest virtual currency in the world give that there are so many people with Facebook accounts and the ability to send value from one account to another via Facebook would be so attractive. Facebook did indeed launch “Facebook Credits” but they weren’t really a currency, just a way of prepaying for virtual goods with the service. A virtual currency is something more, it’s true electronic money that you can send from one person to another.
Hence the ELMI. Now, as the FT pointed out, this is not actually a big deal for an organisation such as Facebook since any reasonably well-funded organisation can easily comply with the requirements but it’s nevertheless a step for them to go out and get one and I hope it means that some fun and exciting new products are around the corner.
Obtaining an e-money authorisation in Ireland would require Facebook to hold capital of €350,000 and segregate funds equivalent to the amount of money it has issued, according to legal experts.[From Facebook targets financial services – FT.com]
Incidentally, the FT article also mentions that Facebook were looking at working with Azimo. I’m not surprised – and I’ll tell you why. I had excellent fun last year at the 2nd annual PayExpo Dragon’s Den. Our good friends at Clarion were kind enough to ask me to chair again and along with my fellow judges Mark Beresford from Edgar Dunn, David Parker from Polymath and Robert Courtneidge from Locke Lord I heard three finalist pitches:
- Azimo, which I thought was a nicely done remittance play.
- Pktmny, which as I recall was a new incarnation of the Visa Buxx / family accounts kind of proposition, and was rather nicely executed.
- Itemize, a receipting white label. They were good sports when I described them as an NSA PRISM-style play to sneakily steal the Level 3 POS data that retailers don’t want to give away (but that’s essentially what it is!). The idea is that, say, Barclays add Itemize to their mobile banking app so that I scan my receipts into it and Barclays can then send me offers and other propositions based on knowing what I buy.
I won’t patronise you with all the cliches about how hard it was to choose a winner, and nor will I admit daylight to the judge’s discussions, but in the end we choose Azimo. With an endorsement like that, it was only a matter of time before Facebook, Apple or Google came knocking on their door…
P.S. While we’re talking about PayExpo, don’t forget to vote for me for their Payments Power 10!!.