FINTECH: Facebook's Faustian Banking Bargain.

Here's a Trojan horse if we've ever seen one. You probably already know that Facebook would like to get its paws on some banking data. The social network giant approached several of the largest global banks -- JPMorgan Chase, Citigroup, Wells Fargo, and US Bancorp -- to get financial pipes that map onto its users. Such financial data would then be integrated into Facebook Messenger, and not sold to advertisers according to the company. Putting aside issues of Cambridge Analytica and other various public trust mistakes, Facebook is clearly asking the banks to disintermediate themselves by shifting the primary consumer interaction from bank apps to its Messenger. 

This is a particularly Faustian bargain. Facebook is already integrated into payments via Mastercard,  American Express, and PayPal. It is of course exploring blockchain, and effort led by the former president of PayPal. In a recent review of P2P payments providers, Facebook lagged behind Apple Pay, Venmo and Square, but was ahead of Zelle, the banks consortium. It is experimenting with Whatsapp as a payment rail in India. Looking at a report of recent patent filings for banks, in every category including transaction processing, mobile banking, e-commerce and payments, the tech companies (e.g., IBM, Google, Microsoft) hold more intellectual property than the banks. So giving Facebook customer financial data not only hands over the customer, but puts that customer into a far better technology platform. 

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Which gets us to the following -- why doesn't Facebook just buy the data with customer permission? In Europe, PSD2 has forced large banks to open up all their data via APIs. In the US, Yodlee (under Envestnet), ByAllAccounts (under Morningstar), Quovo, Plaid and many others offer account aggregation as a service across thousands of banks. These are stable, proven products used by many financial institutions. Oh wait -- Yodlee costs at minimum $0.40 per user per month. For 214 million American Facebook users, that would add up to about $1 billion of cost. We get it. Facebook wants to offer the Faustian bargain, and they want it for free.

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Source: Facebook Bank Request (VergePayments Source), Consumer Reports (P2P Payments), Cipher (IP Patents Data), Yodlee