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Could Facebook's New Mobile Purchase Platform Be a PayPal Competitor?

Opinions expressed by Entrepreneur contributors are their own.

Move over PayPal. Facebook is testing a new payments product that would allow users to make purchases on mobile apps, using their Facebook login information and previously-stored credit card details. While only a small testing phase will get underway in the next month, if all goes well Facebook expects to expand the service beyond pilot partner JackThreads, the company told AllThingsD.

The service would be utilized by consumers who have previously entered their credit card information on Facebook, whether to purchase in-app add-ons for games like Farmville or to make direct purchases of gifts or other things on Facebook itself. The customer could simply login using their Facebook credentials and pay using stored credit card data, rather than the often cumbersome process of typing in credit card information on a small phone keypad.

The new service focuses on simplifying the mobile checkout experience rather than on payment processing, and commerce companies using Facebook's service will still work with their own payment processors.

Related: The New Rules to Getting Your Facebook Updates Noticed

The obvious question is whether this new service will compete directly with payments giant PayPal, which is already used frequently by merchants to complete Facebook-based purchases. PayPal welcomes the potential competition, saying "We have a great relationship with Facebook and expect that to continue." Facebook was also quick to downplay any ruffled feathers, saying in a statement "We continue to have a great relationship with PayPal, and this product is simply to test how we can help our app partners provide a simpler commerce experience. This test does not involve moving the payment processing away from an app's current provider."

What the new payments product will really do, arguably, is give Facebook even more insight into the shopping habits of account holders, giving the social network (and its advertisers) a multitude of potential data-mining opportunities. That might not sit well with the average user, who is somewhat leery of giving social networks even more sensitive information.

Sucharita Mulpuru, a retail analyst at Forrester Research, doesn't expect the service to catch on. "Nobody trusts social networks with their financial information, and they are certainly not going to trust Facebook," Mulpuru told AllThingsD. "Maybe they have a few million people that have bought something on things like FarmVille, but that does not a network make."

Related: New Feature Lets Customers Make Dinner Reservations From Facebook's Mobile Pages


Katherine Gray

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Katherine Gray is a freelance writer, photographer and desktop publisher based in western Maryland.