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Facebook (FB) to Terminate P2P Services in UK and France

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Reportedly, Facebook FB will stop offering its peer-to-peer (P2P) Messenger payments service in France and the U.K. from Jun 15, 2019. The service, which was introduced in 2017, allowed users to easily transfer money via Messenger using their debit/credit cards.

Although Facebook did not specify the reason, we believe that underutilization of the service in Europe might be the key reason. Per a Facebook spokesperson, the company will “focus on experiences people find most useful.”

However, Facebook stated that users can continue to make “charitable donations” through its platform.

Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote

Can Facebook Bank on U.S. and India?

Facebook’s move comes as a surprise as the global P2P market is expected to grow about 27% year over year to $111.9 billion in 2019, per Statista. Additionally, the number of users is expected to reach 224.4 million by 2023.

In Europe, the P2P market is expected to grow about 26% year over year to $37.8 billion in 2019 and the numbers of users is expected to reach 63.7 million by 2023, per Statista.

However, Facebook is expected to take advantage of its home market where Messenger payment service is available for now. Notably, the number of mobile phone P2P users in the United States is expected to be 96 million in 2019, up from 82.5 million in 2018, per emarketer.

Additionally, the company’s WhatsApp payment service in India, currently in test mode, is gaining traction. Per Financial Times, the service has processed nearly 1 million transactions/month since February 2018.

Facebook’s WhatsApp payment service may have huge growth potential, if it gets approval from the government of India. This is because the country has the cheapest mobile data rates in the world. Moreover, the number of smartphone users in India is expected to reach 829 million by 2022, up from 404.1 million in 2017, per Cisco.

Further, the company has plans to roll out payments on WhatsApp in some more countries.

Competition Intensifying

Facebook should worry about competition from Apple AAPL, PayPal PYPL and Alphabet’s GOOGL Google in the United States.

Apple Pay is witnessing increasing adoption owing to its expansion into new markets and addition of retail partners. Additionally, Apple Pay’s transaction volume was 1.8 billion in first-quarter fiscal 2019, more than twice the volume of the year-ago quarter.

Moreover, Apple’s new credit card, supported by Goldman Sachs and Mastercard, can be used at locations where Apple Pay is not accepted. This is expected to boost Apple payment services adoption rate.

Google is expanding its footprint in the market on the back of partnerships with eBay and PayPal. This is likely to increase usage of Google Pay. Also, PayPal partnered with more than 20 top-tier global financial institutions in the United States in fourth-quarter 2018 and witnessed growth in payment transaction volume. Notably, the total number of payment transactions was 2.87 billion in fourth-quarter 2018, up 28% year over year.

This is expected to put pressure on Facebook’s performance. The company carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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