Is Facebook banking finally here? Commonwealth Bank of Australia and India's ICICI Bank seem to think so, and the social media site's decision to drop its credit system shows it is moving in the right direction.

There’s a buzz that’s started about Facebook banking, as Commonwealth Bank of Australia (CBA) and India's ICICI Bank have recently launched Facebook banking apps, and Citibank is rumoured to follow soon. What’s going on?

Originally, we all thought Facebook would take over bank functions through stealth via Facebook credits. These were, in fact, worth about $1.5bn a year in revenue in 2011, about 15% of Facebook’s revenues, and were predicted to reach almost $50bn by 2014. Then Facebook made a dramatic move in the summer, and dropped Facebook credits in favour of using real currencies, such as the dollar and euro.

Lacking credit 

Why did Facebook drop the credit system? Because it didn’t. It just switched from having something customers didn’t understand – a credit – to something they do understand – a dollar. You still work with Facebook in pretty much the same way – register your credit or debit card details and then you can buy add-ins to games, apps and other media.

In other words, Facebook had decided to take the iTunes route to payments, where everyone is registered with an account profile and all they have to do then is 'confirm the payment' from there. That’s not far off a takeover move in banking, as it is just one step beyond this to consider the idea that 'Facebook connect' can be used as a secure bank logon – and it is being used by some banks, such as Fidor Bank in Germany, as just that – and then this becomes 'pay with Facebook' for a secure payment.

At that point, Facebook has both an iTunes card aggregation capability (currently expected to be for about 50 million people this year, up from 15 million last year) growing into a full PayPal-style payments service shortly thereafter.

As a result, we must still consider Facebook to be a serious financial movement, credits or no credits. That is why banks such as CBA and ICICI are starting to jump on the Facebook payments-and-banking train. CBA, for example, is building a Facebook app that will make it possible for customers to make payments to third parties and to their friends through the social network. Transactions are secured using the bank’s own authentication system. The bank says that it is not seeking to reinvent banking but rather to “help people manage their money and their lives” in ways that suited them.

Joined-up thinking

The rationale for CBA is that customers want to have their financial lives integrated into the internet platform, which is now Facebook. However, they have concerns about Facebook privacy and security and want a bank's reassurance that if they store financial information in Facebook, it will be protected. That is what the bank promises and is delivering.

Similarly, ICICI Bank has launched a Facebook banking application to give customers the ability to carry out a number of banking-related tasks, such as checking account details and getting account statements. The bank claims that using the ICICI Bank App on Facebook is completely safe and secure due to features such as a "secure SSL connection, two-factor authentication process [and] activity details not [being] published on a Facebook wall.”

As part of the security features, the ICICI registration is subject to debit card and PIN authentication and access to the application is subject to a separate PIN authentication generated by the user. The bank goes on to claim that a customer’s account details would remain secure even if the user’s Facebook ID is hacked. “Since your account data is not stored on Facebook, your bank account is completely safe. Even if your Facebook ID is hacked, the hacker will not be able to access the application unless you have shared your application password with the hacker,” says ICICI’s Facebook page.

Finally, in yet another move towards Facebook banking, Citigroup asked the social stratosphere in July if it would be interested in banking on Facebook. This immediately got everyone thinking that Citi would follow on the heels of CBA and ICICI to launch Facebook banking soon. You never know, although Citi has not confirmed such plans yet.

All in all, as Facebook becomes the de facto landing page for 1 billion people on the mobile internet, it would be silly to imagine that it will not become the de facto service for consumers to access their bank details in the near future. That may sound mad, but give it a year or two and I will bet my bottom dollar that your bank will be offering Facebook banking too.


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