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Here’s How Facebook Is Threatening PayPal’s Venmo

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Apr. 14 2017, Updated 9:06 a.m. ET

TransferWise partners with Messenger

Facebook (FB) recently partnered with TransferWise to enable international money transfers through the Messenger app (application). The integration escalates competition for control of the digital payments market. PayPal (PYPL), the incumbent, is on the receiving end.

Facebook had already enabled domestic money transfers in Messenger. Now, the recent move to integrate TransferWise into the app could make it more difficult for PayPal to grow Venmo, its peer-to-peer payment service.

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Growing non-advertising revenue

The ability to send money internationally in Messenger appears to be part of what Facebook is doing to monetize the app beyond advertising and grow its non-advertising business. The company reported non-advertising revenue of $753.0 million in fiscal 2016, compared to $849.0 million in fiscal 2015, as you can see in the above graph. Facebook’s non-advertising revenue sources include fees from Facebook Payments and the sale of devices such as Oculus Rift.

As competition grows in digital advertising, Facebook has been looking to unlock new revenue streams outside this staple. Digital payment is one of its pursuits.

Messenger and TransferWise

Messenger subscribers can now use the app to send and receive money to and from family and friends in the United States (SPY), Canada, the United Kingdom (EWU), Australia, and several parts of Europe (EZU). More countries will be added in the future.

TransferWise, which is used in more than 50 countries, moves more than $1.0 billion through its network every month. The company is backed by investors such as Sir Richard Branson of Virgin Group and Valar Ventures.

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