Facebook is making a big push into the mobile payments space. It wants you to be able to use your Facebook ID on any website that has an "Like" or "Share" button, allowing you to login and pay with one click. But how will this affect you? Here's everything you need to know about Facebook Pay.
Facebook started testing an API called "Pay with Facebook" in June. This API lets you login to a retailer's site and make purchases without ever leaving the site or having to enter your credit card info again. It does this by making a charge through Facebook, which then allows retailers access to your payment information on file with Facebook – including name, billing address, payment method, etc.
It's pretty similar to the way PayPal works. The major difference is that Facebook makes it possible for retailers to process these payments through their own websites, not just on mobile (Check out our full video demonstration of how the Facebook Payments API works in this blog post).
As of October 16th, Facebook has been testing this API with a limited number of retailers, including Everlane and Athleta. The big question on everyone's mind is: what will it mean for consumers if Facebook decides to roll out the payments API across the board? Will the convenience be worth giving up your privacy? Here are five things you need to know about Facebook Pay.
- Facebook is targeting smaller businesses, not the big guys.
According to BI Intelligence's exclusive survey of 200 e-commerce retailers, around 70% are interested in using Facebook as a payment method. However, only 34% plan to actually implement it within the next 12 months, and most said they would want to use it only as a secondary option.
The main reason for this hesitation is that implementation is pretty complicated, and there's no way to know whether consumers would actually use Facebook as a payment platform – especially since retailers have no idea how much more revenue they could make from customers using Facebook to pay.
- You won't be able to use Facebook Pay for purchases of more than $100.
One major concern of retailers is that users could easily rack up charges if they're not paying attention – and it's a valid concern. In the BI Intelligence survey, 56% of retailers said they were worried about how easy or difficult it would be for customers to pay without going through the buying process. This is why Facebook has said that they won't be allowing users to buy goods or services of more than $100 with Facebook Pay.
- You'll only have the option to pay with your credit card, debit card, or prepaid card on file with Facebook.
Once you've logged in using your Facebook ID, you'll have to enter your credit or debit card details on file with Facebook before making a purchase. This way, Facebook's system can make sure you're not violating their policies by purchasing goods and services outside of Facebook (you could still use PayPal, though).
- Facebook will send the retailers your payment info – but it won't be stored on their site.
Retailers that are approved to use the Facebook Payments API will receive your payment information, but it will only be viewable within their backend systems. It won't show up on any part of their website or mobile app. Mark Zuckerberg says this is because they want to make sure retailers don't "build up big data sets" on customers, but the idea of Facebook having access to retailers' payment info is still pretty scary.
- Your information will be subject to retailers' privacy policies, not Facebook's.
One concern surrounding Facebook Pay is whether this would pave the way for Facebook to become involved in e-commerce, or whether it would remain a strictly social experience. Facebook has assured users that the retailers using the platform won't have access to any additional personal data they don't already have, so you can rest easy knowing your privacy is being looked out for by the retail brands themselves.
Facebook says this will allow them to share more information about their users' online behavior with the retailers they've shopped with in the past. But there's no way to tell how much information will be shared, or if Facebook will use the data to attract advertisers while making it more difficult for brands selling on Facebook to do so effectively.