Earlier this week, PayPal and Facebook announced the two companies will be partnering as Facebook Messenger expands its growing number of payment options. The partnership will allow users to easily link their accounts, use PayPal for their purchases when they shop via online stores or the growing number of merchant bots, and track receipts and receive notifications about payments they’ve made.
PayPal and Facebook’s partnership broadens their existing relationship, which allows merchants to pay for their ads via PayPal and offers Facebook users the option of ordering an Uber through its Messenger app. Citing the company’s newly formed deals with Visa, MasterCard, Telcel and Claro, Vodafone, and Alibaba, Bill Ready, COO of PayPal, states in their release that PayPal “will continue to execute on our vision of offering PayPal in more places where people shop online, in app and in store by partnering with companies who share our desire to create meaningful products that benefit both consumers and merchants.”
PayPal’s push to become a ubiquitous presence in ecommerce will undoubtedly be helped by its team-up with Facebook. TechCrunch cites that PayPal has 192 million users, whereas Messenger recently reached one billion users and is utilized by 40% of mobile users in the U.S. In addition, PayPal and Facebook’s partnership piggybacks on PayPal’s successful recent forays into social media via its mobile payment service Venmo. Venmo functions similar to PayPal in that it allows users to make peer-to-peer payments by linking credit cards, debit cards, or bank accounts to the app, but adds a social component, in which users can message each other and see a news feed with information about their friends’ interactions (minus payment amounts). According to ReCode, Venmo has shown enormous growth over the last seven quarters, with a payment volume of $3.2 billion in the first quarter of 2016, up from $1.26 billion in the first quarter of 2015.
Like PayPal, Facebook’s decision to partner up is part of a larger effort to integrate ecommerce and direct payment into its Messenger services. Former PayPal President David Marcus is now Vice President of Product for Facebook Messenger, and since his appointment, Messenger has begun offering a growing number of payment services. Last month, Messenger bots began accepting payment directly via information Facebook users can store in the app, and Facebook Messenger’s current ambitions include ongoing work with Stripe, Visa, Mastercard, and American Express in order to provide users even more payment options.
Additionally, Messenger allows for peer-to-peer payments in much the same way that PayPal’s Venmo does, but PayPal COO Bill Ready stated in the Wall Street Journal that PayPal and Facebook’s partnership will not extend to these payments. In this regard, PayPal and Facebook remain direct competitors, but Facebook has previously stated it has no intention of becoming a payment business. Ready’s WSJ interview offers some insight as to why: “Most of the tech ecosystem chooses to partner. Financial services are messy and difficult, and they have regulatory burdens and compliance issues. If you’re not an expert in that space, it’s burdensome to do so.”
Perhaps the biggest takeaway from the partnership of PayPal and Facebook is the increasing encroachment of ecommerce into social media. Both SnapChat and Twitter have experimented with payment options, although the two have been met with somewhat tempered success. As social media and ecommerce become increasingly intertwined, information about buying habits and how ads, social circles, and peer interactions affect purchases will be added to the already significant store of data Facebook and other social media giants possess. Depending on how it’s managed, this boom of data could have a significant impact on corporations looking to advertise or partner with Facebook. And for AI, machine learning, and bot endeavors that rely on mass quantities of information to increase performance, the influx of data could ultimately lead to more complex and sophisticated applications as Facebook continues its push into the world of bots.