Are you ready to compete with Facebook?
by. Henry Meier
On April 17, 1978, the Wall Street Journal wrote a seemingly obscure article in its Money Matters column describing a trend in which an increasing number of investors were using “so-called personal computers” to model investments in what the paper described as a movement of professional money managers to utilize quantitative measures when making investment decisions.
Fast forward to today and computers are now basically doing the investing for the money managers and investment banks are investing billions of dollars to ensure that they can feed the latest data to their computers before everyone else does. Times change.
Often it is the obscure event that ends up having the biggest consequences, so for me the most intriguing article so far this week was published in the Financial Times on Sunday. It reported that Facebook will soon be obtaining an e-banking license from the Irish government which will allow it to transfer money on its Facebook platform. No one knows for sure what precisely Facebook is planning to do, but when you consider that about one out of every six people in the world use the social network, it has the potential to implement a cooperative financial structure on an industrial scale.
For instance, let’s just say that Facebook simply wants to get a piece of the international remittance system. The World Bank estimates that in 2011 alone there were $350 billion in remittances to developing countries. Imagine how much money Facebook could make if it became the platform of choice for making these electronic payments? The model is already being used. In a previous blog, I talked about a mobile phone payments network, which is booming in Africa called M-PSA, which allows individuals to create electronic bank accounts on their phone and then transfer these funds. Its use has exploded in the developing world. It also enables individuals on the M-PSA network to make micro-loans to fellow network users.
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