Tapping into a virtual currency
15 February 2011 | Tim Phillips
You might have noticed that Facebook issues one of the planet’s fastest-growing currencies. As Facebook issues its own currently, what does this mean for mobile money?
More than 70% of virtual goods transactions on Facebook use Facebook Credits, launched in 2009. That’s 350 applications. In January 2011, Facebook announced that from this July, all developers who build apps for Facebook must use credits as their currency. Facebook makes no secret that it’s looking to build a universal online currency: the marketing manager has modelled its introduction on that of the Euro.
Virtual reality environment Second Life claims the world’s largest virtual economy, funded by the Linden Dollar. There’s little doubt that Facebook, with 500 times as many users, will quickly surpass it. The question: who issues the currency?
Mobile payments company Boku, a partner for 220 carriers in 65 countries, would like it to be issued through mobile phones. Its relationship with Facebook means that if you want to turn your local currency into Facebook credits using your mobile, Boku can do the processing.
Mobile payments have been hailed as the next killer application for the mobile phone, and a huge source of revenue for carriers, every year since the mobile phone was launched. Analysts would return from Nordic developers with excited stories of mobile phone-operated vending machines and ticket barriers; but the creation of a pervasive payment system requires customer confidence and co-operation between operators. When Boku launched in 2009, according to EMEA managing director James Patmore, it intended to focus on the youth market and developing economies, where users have little access to banking. Instead it has found its fastest growth in developed economies, where users of all ages value convenience. Payments are added to the phone bill – bypassing credit card processing completely.
For Boku, a big partner like Facebook is the business driver, because it drives demand to concentrate the minds of local carriers to join an evolving de facto standard. Boku’s success in developed markets offers potential rewards for the carriers who decide to work with the company. Revenues are split between carrier and Boku, but there’s a lot to go round, Patmore says. "Look at the payments industry. The interchange fees charged by the payment brands today are equal to global carrier revenues."
To succeed in becoming the ‘Visa of micropayments’, Boku needs to succeed where others failed – notably SimPay’s attempt to create a European micropayment system. It failed, Patmore says, because "carriers were still focussed on what they could do on their own portal." SimPay was hobbled by strategy differences between Vodafone, T-Mobile and Orange – and maybe because there were few compelling applications. Now there are: Gartner predicts 190 million mobile payment users by 2012. But nothing is more compelling than the creation of a new currency for a new community – even if the things it buys aren’t, well, real.
Tim Phillips can be contacted at: firstname.lastname@example.org
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