Jason Del Rey

Recent Posts by Jason Del Rey

Solving the Mystery Around the New Facebook-PayPal Partnership

facebook_buy_now

Facebook and PayPal have been partners in some way for over three years now, ever since Facebook started accepting PayPal as a funding source for the now defunct Facebook Credits.

But Facebook and PayPal now want you to know that they are partnering some more. The problem is: Neither side is able to explain how this new partnership will work.

Let’s back up for a second.

Facebook this week announced the test launch of a product it is calling Autofill, which AllThingsD first wrote about last month.

The product aims to make buying things on mobile apps easier. It accomplishes this by giving shoppers the option to automatically upload their credit card information into the app by logging in with with their Facebook account info, as long as the shopper has previously bought something on Facebook using the credit card.

When AllThingsD first broke the news of the product, we explained that it could be viewed as competitive with PayPal, since both Facebook and PayPal are both now pushing what are essentially “buy with us” buttons on checkout pages.

On the other hand, Facebook is merely passing along payment info to the merchants and not actually getting involved with processing the transaction — the action by which PayPal and its competitive set make their money. So in this way, Facebook is not currently going after PayPal revenue directly.

With the launch of the product this week, Facebook named three payment partners: Braintree, Stripe and, yes, PayPal.

Braintree is part of the test because the first two apps to integrate AutoFill — JackThreads and the photo app Mosaic — use it to accept payments. Interestingly, PayPal is rumored to be an acquirer of Braintree.

Stripe is part of the test because at least one of its customers who uses Stripe to accept credit cards will soon integrate the Facebook checkout button into its mobile app as part of the test.

Now comes PayPal. The vast majority of PayPal’s payment volume is initiated by people clicking a “Checkout With PayPal” button or some other PayPal-branded button on either eBay or its customers’ e-commerce sites and apps. In short, when PayPal processes a payment, it wants the shopper to know that they are using PayPal, whereas Stripe and Braintree for the most part work in the background. (Braintree is trying to push its Venmo Touch button on mobile apps, but adoption is still in its relatively early days).

It would seem strange, then, that PayPal would now reverse its stance and start ceding shopping checkout real estate to Facebook.

So I asked PayPal and Facebook how exactly this integration will work.

“PayPal and Facebook already have a strong and long-standing relationship working together across Facebook’s payments business,” PayPal spokesperson Anuj Nayar wrote in an emailed statement. “We are planning to extend this relationship with support for Autofill with Facebook. We’ll share more details closer to when it will be integrated.”

So, no details yet. I moved on to Facebook to perchance fill me in.

“They have committed to participate in the test,” Facebook spokesperson Tera Randall wrote about PayPal in an email. “We are still working with them on the integration details and design.”

Will the Facebook button replace a PayPal button on participating apps?

“Don’t know that yet. Still working on the design,” she said. “We are still very early.”

The partnership is surprising for another reason: PayPal has conducted its own research into whether shoppers want to mix their social identity with payment info, according to PayPal president David Marcus, and concluded that there isn’t much interest in such a combination.

“We’ve done a bunch of trials and seen in general — not specific to Facebook — that people are generally pretty reluctant in combining payments with social identity,” Marcus told me in a recent interview. “We did test groups and users groups and wanted to try to build something around that. But there was a certain reluctance from people mixing social and money.”

It seems, then, that we’ll have to wait a bit longer to find out exactly how this mystery partnership will work and why it makes sense for both sides.

In the meantime, it’s easy to see why certain parts of both companies would want to portray each other as partners instead of potential competitors. For one, PayPal parent company eBay’s stock dropped three percent on the day news about Facebook’s test checkout product broke.

And, for Facebook, as a public company, not much good can come out of raising expectations for a fledgling product which is the social network’s debut in the payments world outside of its walled garden.

Yet the combination of Facebook’s massive user base, ad business and an autofill checkout product could prove quite the payments disruptor down the line for commerce companies that want a payment provider that can also bring in substantial new business.

This is, undoubtedly, a fact that everyone in the payments world, including Facebook “partner” PayPal, can’t ignore. Or, really, shouldn’t.


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work