Will ABN AMRO make way for Facebook?


In April of this year, reports surfaced that Facebook applied for an e-money license in Ireland, which would allow the social network giant to provide an e-money service throughout Europe. Until now, Facebook has obtained permission already for several forms of money transfer in the United States. By receiving the license for Europe, it will join other firms such as Google and Vodafone, which have obtained e-money licenses for Europe too.

By becoming an ‘electronic money institution’, Facebook would become a direct competitor for institutions such as Western Union, allowing for the conversion of digital credits into cash by recipients, storage of these credits with the social network and purchasing products online.

Furthermore, money can be transferred cheaper than using traditional banks, especially when transferring money to developing countries. An example is India, where Facebook currently has over 100 million users – it is Facebook’s largest market after the US (Davies 2014). When one wants to transfer money from Europe to India using traditional banks, the fee for this service ranges from EUR 5 to as high as EUR 55, depending on the amount of money being transferred (ABN AMRO 2014). In comparison, one can send digital credits worth 200 euro’s from Europe to India for as little as 1 dollar, by using the London start-up called TransferWise. Facebook has been reported to talk to several companies such as TransferWise about a form of partnership (Bershidsky 2014).

Several issues are involved when Facebook will become an electronic money institution. The most significant one is naturally safety, especially after the scandals and fraud regarding Bitcoin, and Facebook’s personal data mining practices. Facebook will have to considerably change its practices and work on improving its image regarding trust and safety of sensitive information.

I believe that there is a big chance for Facebook to become a serious threat to traditional banking institutions in the future. Although it might take the company substantial efforts to deal with safety issues and perceptions, presently it can already be seen from Apple’s recent launch of Apple Pay, Alibaba’s Alipay and Paypal, that a major change is taking place in the global banking practices.

Do you believe this scenario will ultimately happen? And what can traditional banks do to defend their position?


ABN AMRO, 2014, Tarieven voor betaalopdrachten, ABN AMRO, 2014, https://www.abnamro.nl/nl/prive/betalen/tarieven/betaalopdrachten.html

Bershidsky, L., 2014, Who would use Facebook as a bank?, BloombergView, 14 April 2014, http://www.bloombergview.com/articles/2014-04-14/who-would-use-facebook-as-a-bank

Davies, S., Robinson, D., Kuchler, H., 2014, Facebook targets financial services, Financial Times, April 13 2014, http://www.ft.com/cms/s/0/0e0ef050-c16a-11e3-97b2-00144feabdc0.html#axzz3Ec1nS0Ce

Fortune, 2014, Need money? Check your Facebook page, Fortune, 24 April 2014, http://fortune.com/2014/04/24/need-money-check-your-facebook-page/

Gibbs, S., 2014, Facebook prepares to launch e-money transfer service in Europe, The Guardian, April 14 2014, http://www.theguardian.com/technology/2014/apr/14/facebook-e-money-transfer-service-europe


2 responses to “Will ABN AMRO make way for Facebook?”

  1. jesperdt says :

    Interesting post, I didn’t know that Facebook was busy setting up an e-money service. I think the main factor to succeed will indeed be trust. The article “A model of trust in online relationship banking” (Mukherjee and Nath, 2003) states that reputation is a significant factor of online trust. Facebook, however, has been criticised that it is used as a means of surveillance and data mining. I therefore expect consumers to be extra careful when they choose for Facebook as an e-money platform, taking these issues in account. I do agree with you that Facebook can be a convenient way to transfer money.

  2. bteber says :

    Thank you for bringing this subject to my attention. I agree that there is a fair chance that Facebook will enter the banking market, but in the following five years in developed countries only for simple transactions like payments I think.
    While for most consumers the relationship with their bank predominantly consists of making and receiving payments (approximately 80 percent of customer interactions with banks), traditional banks provide other services like mortgages as well. As payments represent the beachhead for banking relationships, entering this market (segment) by companies like Facebook could eventually lead to the end of brick-and-mortar retail banking if they don’t reinvent themselves.
    However, researchers at McKinsey found out that the more customers use digital-banking channels, the more they actually use branches and call centers. Retail banks therefore need to integrate their digital and physical operations. Most retail banks already have moved their capabilities online to make banking more convenient for their customers. Bain concludes that banks need to create additional online experiences, like starting the mortgage application when searching online for houses. They also should create flagship branches that serve as a nice place to be able to inform customers about complex products and to provide trusted advice.
    In developing countries, a lot of people aren’t a client of a bank. For example, in at least nine African countries more people have mobile money accounts than bank accounts. This gives companies like Facebook the opportunity to steer these people to their mobile-driven banking solutions. In the future Facebook could add more banking services beyond payments.

    Bhan, N. (2014). Mobile Money Is Driving Africa’s Cashless Future, HBR Blog Network, Available at: http://blogs.hbr.org/2014/09/mobile-money-is-driving-africas-cashless-future
    Bollard, A., Doshi, N. & Maxwell, M.N. (2014). The future of US retail-banking distribution, McKinsey Quarterly August 2014
    Denecker, O., Gulati, S., & Niederkorn, M. (2014). The digital battle that banks must win, McKinsey Quarterly August 2014
    Rigby, D. & Baxter, M. (2014). Rethinking the Bank Branch in a Digital World, HBR Blog Network, Available at: http://blogs.hbr.org/2014/09/rethinking-the-bank-branch-in-a-digital-world

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