Facebook, Xiaomi each launch mobile payment services in challenge to Apple, Alibaba
Facebook's more than one billion users will soon be able to send each other money through the app it revealed this week following a separate announcement by Chinese mobile giant Xiaomi that it is entering the increasingly crowded mobile and online payments market.
Xiaomi, often known as the "Apple of China", announced a brand new mobile wallet system this week as Facebook revealed its ambition to expand into e-commerce related services. Xiaomi is attempting to one-up its competitors with a familiar feature to banking, but not mobile payments: the Chinese company will pay users interest on the money transferred to its digital wallet.
The new Facebook payments system, rolling out to US users in the coming months, is built into the company's Messenger app. After they've connected a debit card to their account, users can tap a dollar sign on the screen to send money to a friend they're chatting with.
"The money you send is transferred right away," Facebook said in a statement. "It may take one to three business days to make the money available to you depending on your bank, just as it does with other deposits.
Facebook's move to introduce payments comes after it poached Paypal president David Marcus last June, placing him in charge of messaging products.
It will put Facebook in direct competition with start-ups Square and Venmo, which have both built significant US userbases by making it easier for people to send each other money through their phones and pay for goods and services at certain businesses, as well as Snapchat, which added a similar payment function in November.
Facebook attempted to buy Snapchat last year for more than US$3 billion, but were rebuffed by CEO Evan Spiegel. Snapchat was recently valued at US$15 million following several new investments, including from Chinese e-commerce giant Alibaba.
According to Wired, Facebook's foray into mobile payments is part of an attempt to expand into a wider e-commerce space by getting users used to paying for things on the social network as it tests a "buy" button that enables the instant purchase of items through the newsfeed.
At present, Facebook's payment system only allows users to send each other money, but it is not inconceivable that the social network will expand its service to let users pay for goods and services using the app. A number of large multinational companies are rapidly expanding into the mobile payments market, believed to be worth more than US$1 trillion in 2014 and growing exponentially.
Apple Pay, which rolled out to iPhone users in the US in October, now accounts for two-thirds of all US mobile payments. Japanese messaging app Line also recently announced plans to expand its Line Pay service overseas.
In China, the most mature mobile payments market, payment providers processed more than 6 trillion yuan (US$960 billion) in 2014, five times the previous year's total, according to iResearch. The market is currently dominated by Alipay, which powers Alibaba's e-commerce platforms Taobao and Tmall and recently announced a pay-with-a-selfie function. Alibaba is facing increasing competition however from Tencent, which last year launched a mobile payment service for its more than 438 million active users.
Xiaomi, China's largest domestic smartphone brand, is now joining the fray. At an event in Beijing on Tuesday, company president Lin Bin announced a mobile wallet with a twist: interest.
Users of the Xiaomi wallet can earn an interest rate of 3.058 per cent on money transferred to it from their bank accounts. Spokesman Tony Wei told Re/Code that the product is similar to Alibaba's Yu'e Bao money market fund launched in 2013.
According to Xiaomi, there are no plans at present to expand the service into a true mobile payments system like Apple Pay or TenPay.
“In China, it isn’t consumer behavior to pay with a phone-swiping yet,” Lin said.