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   ISSUE 35

30 June  2014

Article of the Month  Around the World

Facebook eyes expansion in to rapidly growing mobile money industry


The social media giant Facebook has been creating news very frequently with its aggressive acquisition strategy. Ever since the company started, various innovative features were added to the main Facebook application to enhance user experience. However, since the focus shifting from �Web� to �Mobile�, aggression has been tremendous and performance has been commendable.

Amidst these developments, the Menlo Park Company gained further attention after revealing its intentions to provide mobile money services to facilitate international remittances. Earlier attempts of Facebook to enter mobile payments through Facebook Deals, Facebook Offers, Facebook Gifts and �Want� shopping button failed as consumers did not perceive the social network as a shopping device. However, unlike these initiatives, Facebook has a strong business case in entering the remittance business.

As an initial phase, Facebook is working with banking regulators in Ireland to obtain approval to operate as a cash transfer and a remittance company. This move of Facebook is set to challenge a Billion dollar industry which has been in existence for decades.


Why Mobile Money & Remittances?

Mobile money is an industry primarily focused on financial inclusion. Today there are 236 mobile money deployments in the world serving more than 200 million people to meet their basic financial needs such as money transfers, utility payments and micro savings through their mobiles. However, still 3/4th of the world�s poor remains unbanked. Potential for mobile money is high in developing nations especially in African and Asian continents. Experts believe that the move of Facebook would act as a catalyst for financial inclusion.

As a business, the move makes sense with rapid growth in mobile handset & internet penetration globally. This would be fuelled by Facebook�s growing active user base, currently at 1.2 Billion. The social media tool is considered as one of the most frequently used applications by migrants to keep in touch with their friends and families back home. Facebook�s recent acquisition of WhatsApp for $19 Billion also could be considered as a strategy to make inroads to this great opportunity. Investment in this advertising revenue less texting service could payback if the service become successful as it could capture a large base untapped by Facebook. These factors place Facebook at a very favourable position to serve a ready market.


Transaction speed, security, accessibility (both at sender & receiver ends) and cost effectiveness are few main factors which affect this market. Though Facebook would have the capability to facilitate online real-time peer-to-peer transactions, the success would also depend on the strength of the ecosystem around this industry in different countries.

Entry strategy

Giant leaps of this scale are generally approached through partnerships as synergies could help each other when they move through the learning curve. Based on the sources, it is expected that Facebook would follow the same and partner with payment service providers. According to Financial Times, Facebook is in discussions with remittance partners such as TransferWise, Moni Technologies and Azimo. But it seems there are other partners also involved in discussions. Financial Times also reported that among different news, Facebook has offered to pay $10Million to recruit a co-founder of Azimo as a director of business development. However, both parties have declined to comment on the matter when it was inquired.

Having minimum number of partners to facilitate a particular remittance corridor would be beneficial for Facebook and customers. This would help the customers to save more compared to the high fees paid for money transfers currently. Pricing strategy would be an interesting area to focus on as significant savings should be created for customers while managing the partners in the remittance ecosystem.


Will this have an impact on Sri Lanka?

The impact of this initiative could also have an influence on Sri Lanka. Among global remittance recipient markets, Sri Lanka is within the first 30 countries. Inward remittances account for over $6 Billion annually. This contributes more than 10% to Sri Lanka�s Gross Domestic Product. Increase in number of migrant workers and tourist arrivals also could fuel this growth.

Rise in smartphone, internet and Facebook penetration would also contribute to this development if the service is enabled in Sri Lanka. As the mass of the beneficiaries are spread in sub urban and rural segments, the adaption to the service would depend on the simplicity of the application, controls that would be in place with directions of regulators and the strength of cash out infrastructure. However, it would be an interesting development for the financial services industry as this would be an additional channel for money remittances apart from the channels offered by banks and financial institutions.

In conclusion, it is clear that Facebook�s initial effort to keep people connected, now gradually making them way to capitalize on the user base to facilitate other needs. Global expansion of this service would make dramatic changes to people�s transactional behaviours. From Facebook�s point of view, this would be a strong revenue stream which would place the company levels ahead of other social networks. However, it should be noted that expansion would be challenging as this industry is governed with heavy controls in terms of Anti Money Laundering and Counter Terrorist Financing. Also the giant banks and international money transfer services would fight back strongly to remain competitive.

By Ruzan Ahamed

Ruzan serves as a contributing editor for Digit magazine and also is a senior executive at Dialog Axiata PLC. This article was initially published by www.digit.lk.



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