"The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments"
For the ~$2 trillion[1] going through online payments, bringing down the online fraud loss by every 0.1% is equal to $2B, if over time Facebook can reduce that online fraud rate by 0.5% or more there is your $10B.
Using your real identity to make online payments could reduce that to real world levels.
If this is the case then reducing the fraud rate from 1.8% to 0.35% in online payments (a reduction of 1.45%) would calculate to a savings of $29B for this industry.
Thus, if Facebook is able to be a major part of that reduction by using real identities then they will get much of this transaction business. If they are able to pull this off there is no stopping them...
Feel free to rip me apart, but there is some validity to may arguments :)
Using your real identity to make online payments could reduce that to real world levels
How many of your friends have had their facebook accounts stolen? For me, it's a few percent. "Oh look, another random acquaintance is stuck in Abu Dhabi and needs me to wire them some money"
Facebook security isn't nearly good enough to be handed my wallet. Actually it's not my wallet that's the problem, it's the wallet of everybody who uses "password" as a password.
> Facebook security isn't nearly good enough . . .
Pretty sure most cases where people's accounts get hacked have nothing to do with the security of the website, except inasmuch as the site fails to provide an authenticator. Most "hacking" involves getting a computer virus or entering your password into a site that is not actually Facebook.
This is true. On the other hand, online banking security starts from "the client computer is compromised", and a new service that says "you're fully liable if your machine is hacked" will have... problems getting traction.
"online banking security starts from 'the client computer is compromised'"
Facebook currently (or did) reset the password by having you identify the names of your friends using their pictures. I could see this as a way to authenticate a transaction.
Really? None of your friends have pictures of cats or their babies or grainy shots of them and four other friends as their profile pictures? Because sometimes it feels like half of mine do.
Very true, now the question is who they need to acquire to gain that technology (Square? Maybe, maybe not). Paypal processed US$ 71 billion in 2009, an increase of 19 percent over the previous year. I don't know what they did in 2011, but it might be around $100B?
The question is not if online payments is able to work, it is a question of if Facebook is able to crack the nut and reduce the fraud by using real identities. There are real problems as you have pointed out, but (and it is still a very big BUT) IF (and that is a very big IF) they are able to pull it off it will be a game changer for them.
For the ~$2 trillion[1] going through online payments, bringing down the online fraud loss by every 0.1% is equal to $2B, if over time Facebook can reduce that online fraud rate by 0.5% or more there is your $10B.
Using your real identity to make online payments could reduce that to real world levels.
If this is the case then reducing the fraud rate from 1.8% to 0.35% in online payments (a reduction of 1.45%) would calculate to a savings of $29B for this industry.
Thus, if Facebook is able to be a major part of that reduction by using real identities then they will get much of this transaction business. If they are able to pull this off there is no stopping them...
Feel free to rip me apart, but there is some validity to may arguments :)
[1] http://www.edgardunn.com/uploads/100012_english/100385.pdf