June 10, 2014

Have you received an appeal from a Nigerian prince, promising you his undying gratitude if you would deposit a large sum of his money into your bank account? As a reward for your kindness, you would only be obliged to return a portion of the deposit, retaining the rest as payment for services rendered. Scams like these are why it is so difficult to do business even with honest individuals in places like Nigeria.

The Sound of Money

If Facebook has its way, more than 4 million Nigerian users could enjoy the convenience of money transfers that citizens in the US, Europe and the rest of the developed world take for granted. Along with scams, corruption and money laundering have scared many mainline banks away from doing business in places like Nigeria, regardless of potential profit.

Related: The IRS is on Facebook, spying on your profiles.

And the potential profit is indeed huge. Taavet Hinrikus, co-founder of London based TransferWise, commented to the Guardian that the World Bank estimates the remittance market alone to be valued at $500 billion. Add transfers between the developed and developing worlds, and the potential value jumps to between $5 trillion to $10 trillion.

Not So Far Fetched

Facebook already has skin in the monetary transfer game, through having achieved vested status as a bank in Luxembourg. Facebook is also involved in money transfers within the US through its system of payments between users through popular apps such as Candy Crush and Farmville. Transactions to games publishers and other apps utilized within Facebook generated $2.1 billion in 2013, of which Facebook claims a hefty 30 percent.

Given these circumstances, it is not so far fetched to consider that Facebook may well be close to achieving regulatory approval for “e-credit” status in tax-friendly Ireland. Obtaining “e-credit” status there would allow Facebook to facilitate credit transfers between users throughout Europe, which the recipients could exchange for cash. This system would reportedly use “passporting,” which allows digital payments to be made to and from users in European Union member states. The potential for profit seems to be attractive enough for Facebook to be willing to subject itself to regulation as a bank in Ireland to achieve a foothold in the market.

In addition to TransferWise, Facebook has reportedly been involved in discussions with Azimo and Moni Technologies. These two companies are, like TransferWise, London based startups operating in the money transfer arena. And what about developing markets like India and Africa, where infrastructure for mobile phones has far outstripped the capacity for land lines? The potential reach of that market – nearly 2 billion, according to Brian Blau, a director from the research firm Gartner.

Slicing the Pie

All of this would put Facebook in direct competition with firms like PayPal, Google Wallet and Amazon. But concentrating on money transfers rather than payment systems would allow Facebook to operate more like Western Union while avoiding the competition of a crowded European field. There are no disclosed plans at present by Facebook to extend money transfer services to Nigeria. But that Nigerian prince may have a proper means o dispensing his funds world wide, sooner rather than later.