Facebook Inc (NASDAQ:FB) forced its mobile users about two years ago to download “Messenger” as a separate app if they wanted to chat with their friends. Since then, Facebook has expanded the platform by adding stickers, apps, and games and allowing friends to send money to each other. The move has allowed Facebook to monetize its users beyond its news feed, but so far it has barely put a dent in the company’s total revenue. However, Facebook might be planning something big for the Messenger app that could be a huge boost for FB stock.
It looks like Facebook is going to turn Messenger into a mobile payments platform. According to source code uncovered by “The Information,” some of the commands found in the latest version of Messenger include “pay in person,” “pay directly in Messenger when you pick up the item,” and “no cash needed.” (Source: “Facebook Messenger is reportedly taking on Apple Pay and Samsung Pay,” VentureBeat, April 1, 2016.) The new feature would allow users to pay for an item in retail stores using Messenger, with Facebook authorizing each credit card transaction.
So far Facebook has declined to comment, but if the company has plans for mobile payments it will be going head to head with Apple Inc. (NASDAQ:AAPL), PayPal Holdings Inc (NASDAQ:PYPL), Alphabet Inc (NASDAQ:GOOG) and Samsung Electronics Co Ltd (KRX:005930).
This could be a huge opportunity for Facebook. Messenger finished 2015 with 800 million users, which makes it the second most popular app, just behind “WhatsApp,” which Facebook also owns. (Source: “Most popular global mobile messenger apps as of January 2016, based on number of monthly active users,” Statista, last accessed April 1, 2016.)
The mobile payments market is also exploding, so it makes perfect sense for Facebook, with its massive user base, to enter this space. According to research firm Forrester, mobile payments are expected to reach $142 billion in volume by 2019, which would represent a compound annual growth rate of 184% from 2014. (Source: VentureBeat, op cit.)
Of course, a key component for Facebook to capitalize on mobile payments will be user adoption. So far, users have been slow to let their phone do the paying. According to a recent study, only nine percent of consumers use mobile payment when it’s available, while 42% have never made a mobile purchase. (Source: “Mobile Payments Showdown: Apple Pay vs. Android Pay vs. Samsung Pay,” TIME Money, April 1, 2016.)
Further research shows that only 16% of users owning an “iPhone 6/6s” have tried “Apple Pay.” (Source: “Is Facebook Looking To Enter The Mobile Payments Business?” Forbes, March 31, 2016.) The reasons for the low adoption are that users aren’t aware that certain stores accept Apple Pay and users simply don’t remember to use the payment platform.
However, Facebook might be in a better position given that it almost has a billion people using Messenger and a large number of business pages on the platform. As of April 2015, Facebook had 40 million active small business pages on its platform, which Messenger could be used as a payment platform. (Source: Ibid.)
The Bottom Line on Facebook Stock
If Facebook plans to monetize its messenger app by turning it into a mobile payments platform, the potential revenue upside could be huge.
In a conference call in January, CEO Mark Zuckerberg even mentioned that Apple Pay could be integrated into Messenger along with other payment services.
Either way, if Facebook’s mobile payments come to light, FB stock should get a boost over the coming years.