Reducing payment fraud
Facebook (FB) has signed up for Visa (V) Token Service, signaling its growing interest in the digital payments business. Visa Token Service is a security technology that significantly reduces the risk of payment fraud, as it involves the use of a unique digital identifier (token) that keeps actual card details private.
Facebook joined the Visa Digital Enablement Program (or VDEP) to take advantage of Visa’s token technology. By joining VDEP, Facebook would be able to offer simple and secure payment integration to businesses and payment processors on its platforms.
Potential for more payments services for Facebook subscribers
By joining VDEP, Facebook could help accelerate the availability of payments and e-commerce services for its users. Facebook recently teamed up with PayPal (PYPL) to provide a peer-to-peer money transfer service within the Messenger app. Messenger is a mobile messaging service used by more than 1.3 billion people annually.
Diversifying revenue streams beyond advertising
Joining VDEP could bolster Facebook’s prospects in the digital payments market, potentially opening the door to drive more revenue diversification. Facebook relies on online advertising for about 99% of its revenues. A loss of advertisers or reduced spending by advertisers could cause an adverse impact on Facebook’s revenues and profits.
The global digital payments market presents an interesting revenue opportunity for Facebook. According to Juniper Research, volumes for global digital payments grew 20% in 2016 to $3.6 trillion.