By: Leilani Doyle & Vivian Le
In 2012, David S. Evans wrote an article for PYMNTS.com that presented several reasons that payment firms should be worried about Facebook Credits. According to their website, Facebook Credits are “a virtual currency that [users] can utilize to buy virtual goods within any games or apps of the Facebook platform that accept payments.” Whenever a developer completes a sale on the platform, Facebook credits the proceeds from that sale to the Developer’s Balance, minus a 30% service fee and any applicable sales tax.
In his article, Evans claims that the main theme behind these reasons to worry is simplicity. When using Facebook Credits, each user has a “wallet” that enables a “one-click method” to purchase more. There are even incentives like Facebook gift cards that entice users to maintain their wallet. With this wallet, Facebook is able to gather key information about users’ payment methods, personal information, and purchase history. Evans also claimed that if this form of virtual currency were to gain more popularity, it could become as common as government-issued currency. He concludes his article by stating that because fewer firms are required to move money using Facebook Credits, that this virtual currency presents a threat to the payment industry.
While reading this article, my guess was that if Facebook Credits started handling a substantial amount of value, governments would put a kibosh on the payment scheme. The last thing any government wants is to lose control of their currency…think Bitcoin.
In just over a year since publishing this article, Facebook announced in June 2013 that the company will officially discontinue Facebook Credits on September 12. Instead, the company is going to use local currency payments API (application programming interface) in hopes of simplifying in-app purchases for users. This move allows developers to “create their own in-app virtual currencies, such as Farm Cash in Farmville, that are based on the real-world values of local currencies, such [as] the U.S. dollar or the Japanese Yen.” Also, app developers will be able to charge subscription fees for use of the API’s. Although Facebook is phasing out Facebook Credits, the company is still going to keep the payment processing system that charges a 30% service fee.
For the full article, visit SFGate.