The Central Bank of Ireland recently granted Facebook Payments International Limited (FBPIL) an e-money license, which effectively allows Facebook to facilitate peer-to-peer payments on its platform. Since Ireland is one of the member nations of the European Union (EU), Facebook is authorized to operate as a money transmitter in all of the EU states.

On Oct. 24, Facebook was granted an e-money license in the EU, which meant that the company could roll out the same feature US-based consumers currently use: an embedded payment solution built on top of its native messenger application.

In an interview with TechCrunch, a Facebook official confirmed that the company is planning to launch a peer-to-peer payment system for the users of its messenger application in the EU.

The official stated:

“The license enables us to roll out products like charitable donations on Facebook or peer-to-peer payments via Messenger in Europe, as we have in the U.S. The license authorizes FBPIL to issue donations from Facebook users to charities registered in the European Economic Area (EEA) only; and peer-to-peer payments, within the EEA.”

Cross-border payments and volume

François Briod, co-founder of money transfer comparison site Monito, stated that Facebook has two options moving forward; either to facilitate cross-border payments in euro or settle cross-currency payments to enable European users to send or receive money to or from countries outside of the EU.

If Facebook decides to facilitate cross-currency payments, users in the UK will be able to send payments to users in the EU in the same peer-to-peer network and messaging application.

WeChat, one of the most dominant messaging applications in China, recently revealed that its users sent over 32 bln transactions within six days, surpassing PayPal’s annual transaction volume of 4.9 bln. If Facebook successfully uses its e-money license to establish its presence in the EU and other European countries, it could compete against existing peer-to-peer financial networks such as the Barclays Pingit.

Currently, 1.3 mln users are using Pingit in the UK alone, which limits daily payments to $6300 for individuals and $12,000 for businesses. Despite the low daily limits, Barclays stated that the company has seen significant growth in terms of user base and trading volume.

“During 2012 alone, Barclays recruited more new accounts using Barclays Pingit than through its online account opening process,” said Barclays.

Competition against liquidity of Bitcoin

While the demand for mobile payments and the potential of the market is increasing rapidly on a daily basis, three major issues Facebook users will struggle to deal with is liquidity, transaction limit and extensive KYC policies.

For users on the Facebook peer-to-peer network to send payments across the messaging application, they require bank-issued accounts or cards. For instance, on the US messaging application, users need to add a debit card issued by a US bank to their accounts to send money to Facebook friends.

For most users, considering the demographic of Facebook users, this could become an issue as they would need an EU-issued bank account to send payments. This eliminates the entire purpose of using a peer-to-peer financial network as it would be the same as using online banking to send payments.

Apple’s iOS messaging application has various digital networks like Circle which enables users to send Bitcoin to others. This creates an ecosystem of borderless payments with low fees and high security.

Thus, for Facebook to compete with digital currencies like Bitcoin, it would need to improve its functionalities and increase the efficiency of its peer-to-peer payment network.