Facebook Hires PayPal President, Putting Mobile Payment Technology Front And Center

Facebook’s surprise announcement Monday that it hired PayPal President David Marcus to oversee Facebook Messenger signals that the social media giant is serious about delving into the mobile payment space.

’This is a huge win for Facebook and absolutely a loss for PaypPal,’ said Denee Carrington, a senior analyst serving e-business and channel strategy professionals at Forrester Research. ’It is definitely a loss [for PayPal], and it certainly bolsters Facebook’s likelihood of success in the payment space going forward. Facebook has had many attempts in the payments space in the past and none of them have worked. I would expect them to be much more successful with David Marcus on board.’

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Solution providers see mobile payment technology taking off in the way people transfer funds, whether it is peer-to-peer or business-to-business. They said they see the growing technology as a way to more quickly transfer funds and make the financial side of their jobs easier.

’We’ve seen encryption technologies and people's faith in general in that kind of technology growing; tap-and-pay terminals is an example,’ said Douglas Grosfield, president and CEO of Xylotek Solutions, an Ontario-based solution provider. ’To be able to securely transfer funds is something that has some legs; that is something that will continue to grow. The channel will embrace mobile payments as a way to enable their technical folks on-site to receive payments immediately.’

Grosfield said he believes mobile payments will have an impact on the channel in the not-so-distant future, and Facebook is on a short list of companies that will be behind them.

’I think Google, Amazon, Apple and Facebook are companies that have got pretty good track records of making a new market,’ he said. ’If anyone is going to spearhead this thing, that is the list.’

For his part, Marcus has been the president of eBay’s PayPal for two years after joining the company through its 2011 acquisition of Zong, the mobile payments company of which he was founder and CEO. He’s considered the face of PayPal, running a 14,000-person company with $6.6 billion in revenue.

’We’re excited by the potential to continue developing great new messaging experiences that better serve the Facebook community and reach even more people, and David will be leading these efforts,’ Facebook said when announcing the hire.’We are incredibly excited to work together with David and to learn from all his experience, and David will be sharing more about his work in the coming months.’

But why leave such a high-profile position after working in startups for so long? According to Marcus, he missed the environment and enjoys building new products from the ground up .

’I realized that my role was becoming a real management one vs. my passion of building products that hopefully matter to a lot of people,’ Marcus said in a Facebook post. ’So after much deliberation, I decided now is the right time for me to move on to something that is closer to what I love to do every day.’

Marcus’ reasoning to leave PayPay makes sense in the eyes of analysts, who also believe it took some persuasion from Facebook to get the deal done.

’It makes you wonder what [Facebook] offered,’ said James Wester, research director of Global Payments for IDC Financial Insights. ’You know they’re not going to be cheap when they are coming after a guy who is the president of PayPal. I mean, he’s a relatively high-profile guy, especially in financial services, so it does make you wonder what would make him go from being president of PayPal to now being basically the head of a product at Facebook. From the title standpoint, the move looks to be lateral at best.’

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About 12 billion messages are sent on the social media platform daily, while its messaging app is used by more than 200 million people every month.

Analysts say that Marcus isn’t ’jumping a sinking ship’, despite the rise in competing payment services from Amazon, Google and an expected mobile payments announcement from Apple in the coming months, as PayPal is still a major player in the space.

’PayPal is not going to go anywhere. That is for sure,’ said Carrington. ’They are working very hard to grow in terms of mobile remote payments and in-store payments as well.’

Marcus stated in his Facebook post that it was a conversation he had with Facebook creator Mark Zuckerberg, in which the 30-year-old multibillionaire shared a ’compelling vision about mobile messaging’ that sold him on the move.

We don’t yet know what that vision is, but it is clear Zuckerberg has invested quite a bit in it. For now it is a game of wait and see, but all signs are pointing to Facebook setting up for a huge play in the mobile payments space.

’[PayPal is] a big company and that may not be attractive for a guy like Dave Marcus whose heart is in startups,’ said Wester. ’Here’s a guy who came to them through an acquisition and that’s a much different atmosphere. He likes startups and that excitement and that kind of energy, and you’re not going to get that in a player like PayPal. I have a feeling that he got an opportunity to do something from the ground up and build a product that is going to be a little higher profile. I get a sense that he’ll be building a startup within the Facebook corporate, and it’ll be a stand-alone product.’

PUBLISHED JUNE 12, 2014