Facebook is planning to test a mobile payments service that would allow users to make purchases inside mobile applications using payment information they had added to their account on the social network.
The social network said yesterday that it was working on a ''very small test'', though it had not yet set a schedule for making the service available to users. The service would use payment information that shoppers stored on Facebook to automatically complete checkout forms of certain mobile apps. The app would then process the purchase.
In an e-mailed statement spokeswoman to Tera Randall said, Facebook had a "great relationship with PayPal, and this product is simply to test how we can help our app partners provide a more simple commerce experience."
She added, the test would not involve moving payment processing "away from an app's current payments provider, such as PayPal."
The shares of PayPal's owner, eBay Inc though were down on news of the potential competition with the stock sliding $1.05, or 1.9 per cent, at $53.18.
Facebook's stock fell 9 cents to $36.56.
Forrester Research analyst, Denee Carrington, though, continues to have doubts about Facebook's ability in offering mobile payments even though the company had been building up its database of users' credit cards.
"Consumers want safe, seamless and convenient mobile payments and there are a growing number of competitors that consumers trust more - such as PayPal, Visa (V.me) and others," Carrington said in an e-mailed statement.
AllThingsD said in a report that the first partner to use the new system would be men's online clothier JackThreads. The payment system would utilise stored credit cards that Facebook already had in its system, which users had been using within the site for increased promotion, in-game purchases, and gifts.
According to commentators, if the system were to be expanded beyond its limited test phase, it would see Facebook take on players like PayPal, several new startups, and also finally the credit card networks themselves.
The new payment initiative comes after an early June announcement that the social network would phase out its Credits system of payments for all games.
Facebook aims to convert to local currencies by 12 September, rather than use what basically was a virtual incarnation of amusement park ''fun bucks.''
Commentators say, the move to real money, announced in 2012, was put in place to offer greater flexibility to developers from across the world dealing with international currencies. Facebook might however, had bigger plans to move into mobile payments across the board-and with good reason, they point out.
Apart from the fact that the mobile payments business was booming and expected to hit $1 trillion by 2015, Zuckerberg & Co would also be interested in the data. With the online payments Facebook would add another level of data for its ballooning graph search function, which the company hoped would make its service as valuable to consumers as a Google search.