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Does Facebook hold the future of mobile payments in its hands?

Right now there are various different technologies and start-ups actively looking at ways to penetrate the mobile payments market. Each company has taken a different approach, from digital bar codes to near field communication (NFC). 

Alex Matjanec, cofounder of, addressed the future of mobile purchases and how Facebook will play a role. Here is what he had to say:

How do Facebook Credits work?
Introduced in May of 2009, Facebook Credits was originally designed as a virtual currency to allow people to make purchases within games and non-gaming applications on the Facebook platform.

Much like Apple with iTunes, Facebook takes a 30 percent cut on every dollar spent through the Credits platform.

Today users can buy Credits with 15 currencies, including U.S. dollars, Euros, the British Pound and the Venezuelan Bolivar.

How can Facebook’s Credits change the mobile payments arena?
It is important to first highlight, that for any mobile payments system to work, consumers will need to open some form of application to allow users to connect the phone to complete the payment. 

To date, Facebook sees over 200 million unique users accessing the social network through a mobile devices each month.

Almost all of the major brands who would adopt mobile payments in the beginning (i.e. Best Buy, Gap, Target) have invested heavily into growing a Facebook presence. It is this ability to connect to users and their social graph through a Facebook payment option that makes Credits and mobile payments an attractive model.

As a young adult in his mid-twenties, I enjoy playing video games like most of my friends, and so visiting my local Best Buy, I take a minute to open up the Facebook app, check-in and instantly, I receive a deal for 10-percent-off a specific game.

Using Credits loaded on my phone (Facebook Credits is connected to my debit or credit card), I make the purchase by connecting the phone to a retail scanner.

From this point, it is Facebook’s network that makes its payment option so attractive.

As I scan my phone to finalize my purchase, I am presented with the option to share this purchase with my friends.

Selecting yes, opens up an additional discount for my friends and I. From there my friends have the option to use the promotion through Best Buy’s ecommerce page or on location.

What other companies do you expect to be big players in the mobile payments space? Why?
For now, Facebook prefers to play down talk of its broader ambitions for Credits. The 30 percent tax Facebook imposes on those who accept Credits might be too high to allow for the regular sale physical goods and services.

Other big players include PayPal who has more than 81 million active registered accounts and 210 million accounts, in 190 markets and it supported 24 currencies.

Google, with its Google Checkout and Android phones is also set to be a big player. With NFC technology being implemented on all future Google phones, we expect a mobile payment app preloaded on these phones. 

Probably an even bigger player is Apple and its 100 million iTunes users. The iPhone is set to be the main phone to drive mobile payments, even if other phones offer these features.

But one thing is for sure: the mobile (social) payments market will be fragmented for the first few years and Facebook is easily in the position to come out victorious.

What is the current state of mobile payments?
While analysts feel 2011 is the year for mobile payments, there is still uncertainty of how quickly consumers will move their wallet to a digital format or what platform they will use. 

One factor that is definite is the speed at which small business will adapt mobile transactions.

Third-party companies such as Bling Nation and Square to name a few win over merchants by cutting the transaction process fee by as much as 50 percent. With consumers swiping their debits cards more so than ever, this is a huge savings for any company.

Additionally, the three major U.S wireless carriers, Verizon Wireless, AT&T and T-Mobile partnered with Discover Card to form a mobile payment company called “Isis,” a venture to provide mobile payment carrier billing solution for payments.

The closet form of mobile payments in the U.S. that can be utilized nationally is the Starbucks digital gift card. 

While this option only applies to Starbucks stores, consumers can now makes purchases by scanning their phones.

What are some of the current challenges in the mobile payments space?
The biggest challenge, currently keeping mobile payments from going mainstream is technology adoption. 

Not only do consumers need to carry a phone that has the correct technology, retailers also need to implement technology that connects with the phone.

Other challenges that could cause slow growth are the number of companies attempting to break into the space. 

From small start-ups to large tech companies such as Google and Apple, many consumers could be slow to adopt as they wait it out and see which platform becomes widely adopted.

What needs to change to accelerate usage?
To truly accelerate growth, we believe a large company needs to step up and look at the opportunity as a way to break into the $6.2 trillion retail market by covering the costs of technology adoption. 

One player who is seen to have this ability is Apple. 

As the largest tech company in the world, rumors have come up, that Apple will implement NFC technology into the next generation iPhone 5 and with 100 million users already connected through iTunes, giving away the retail technology to scan mobile payments could be a quick way to gain accelerated usage.

Though it cannot be applied to all of your purchases, Starbucks seems to be the furthest along, allowing customers to purchase digital gift cards that can be scanned at all Starbuck locations nationwide.

To help accelerate growth, implementing a rewards program will draw more consumers to try the new payment platform.  This option to collect and track rewards is one of the key features that have helped Starbucks see quicker adoption.