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Facebook Gears Up to Compete with PayPal in Fintech Market

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May. 24 2019, Published 8:07 a.m. ET

Facebook registers Swiss fintech firm

Facebook (FB) appears to be preparing for a fierce contest with PayPal (PYPL) and others for revenue in the technology-based financial services market. According to a Reuters report, Facebook quietly set up a new financial technology firm in Switzerland early this month. Facebook’s Swiss fintech firm is called Libra Networks and it will focus on payments, investing, financing, blockchain, and an array of other financial technology solutions.

Facebook has been showing interest in the fintech market recently. In addition to partnering with PayPal to build digital payment capabilities into its Messenger app, Facebook has been testing a mobile payment service linked to its WhatsApp platform in India.

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A $305 billion new revenue opportunity

Amid the rise of e-commerce and generally deepening Internet penetration around the world, fintech has emerged as a lucrative business. According to Research&Markets, the global fintech market is growing at a rate of more than 22% annually and will reach $305.7 billion in revenue by 2023. Chinese companies Alibaba (BABA) and Tencent (TCEHY) are in hot pursuit of the revenue opportunity in the fintech market. The companies have built mobile payment services in China and are now looking to conquer the global market. For example, Alibaba and Tencent have been partnering with businesses in America, Europe, and other parts of Asia to allow Chinese tourists to pay with their Alipay and WeChat Pay services, respectively, when they travel overseas.

In America, PayPal and Square (SQ) are helping even small traders to accept credit card payments and have simplified access to small business loans. Last year, Square secured a deal with eBay (EBAY) to lend to its sellers.

Facebook’s non-advertising revenue dropped

For Facebook, the fintech market could prove an important path to more non-advertising revenue. Facebook’s non-advertising revenue dipped 4.0% YoY to $165 million in the first quarter, leaving the company more dependent on advertising expenditures.

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