I'm curious about Square's reaction to this. It seems like people could literally start paying with Facebook at restaurants and bars. Now the charges are just part of the monthly phone bill instead of a monthly credit card bill. For that matter I wonder what implications this could have for credit card companies. Anyone know if, say, AT&T pays the same charge for accepting credit cards as small merchants?
Short term, paying with FB for physical goods (eg. in restaurants, bars) is an unlikely outcome because carrier billing involves giving up an enormous percentage of the transaction to the carriers.
In the U.S., carrier billing typically involves yielding a 40 - 50% margin to the carriers. In Europe, the percentages are lower -- carrier billing is a more mature market there -- but they still top out around 20 - 30%. In developing markets, margins can go as high as 75 - 80%.
I don't know what sort of relationship FB has built with the carriers and what sort of percentage merchants using the billing system will ultimately end up with -- after all, both FB and the carriers will take a cut -- but I would be surprised if it isn't in line with the current percentages charged for carrier billing.
For virtual goods, carrier billing service providers claim the frictionless nature of the transaction and the reach (6 billion mobile subscribers globally) make up for the small margins.
Long term, of course, things could very well turn out differently.
Google also allows carrier billing in Play (theoretically; it failed when I tried to use it), but considering that Google's whole cut is 30% they'd be losing money on every transaction if they pay 40% to the carrier.
Wow those are high! If the whole "paying with your phone" concept catches on perhaps carriers will offer more competitive rates and more than make up the loss on volume of transactions. The current state of retail credit card processing with the signatures and receipts does seem out-dated. Would be so much easier to just wave my phone across some reader. Or just leave the phone in my pocket and use NFC somehow.
