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Alternative Payment Systems, Part 2: Facebook Credits

June 24, 2011

This is the second part of a multi-part series examining alternative payment systems and how they compare to the PayPal X Platform and to each other.

Last time I introduced you to Amazon’s Flexible Payments Service. This time I want to discuss Facebook Credits. We’ll look at what they are, resources for learning more about them, how to use them programmatically, and how they compare with PayPal solutions.

Introduction to Facebook Credits

Facebook defines Facebook Credits thusly in their Help Center:

Facebook Credits are a virtual currency you can use to buy virtual goods in many games and apps on the Facebook platform

They provide a rather lengthy list of games and apps with which you can use Credits (click here to see the list).

A very important thing to note: The kind of purchases listed above are all occurring within the Facebook platform. None of them are external to the platform. And though Facebook’s Help Center definition sticks to the virtual goods line pretty closely, the Facebook Credits homepage itself paints with a broader stroke. It simple says that Facebook Credits are:

The safe and easy way to buy things on Facebook

Note that “things” can include all sorts of real world items and services, not just virtual goods. So if Facebook is going to move Credits into the more general e-commerce and physical purchases spaces, it needs to break out of the internal-only mold.

Enter Facebook Deals, Facebook’s foray into GroupOn-like local deals. The Deals launch was big news for Facebook watchers not just because of the local deals angle, but also because Deals launched with Credits as one of its payment options (the others are PayPal and credit cards, by the way). Facebook contends that the Deals purchases are still “ephermeral goods” since customers are buying vouchers which can be exchanged for things on the real world. But it seems pretty clear to anyone paying attention that you can now spend Credits and receive real world items or services in return, so Credits have essentially escaped the self imposed virtual goods restriction.

You can read more about the news that Deals allows for real world purchases using Credits in this Chicago Tribune article (click here to read). The news also received some analysis in a recent O’Reilly Radar post (click here to read).

The kicker in all of this? Facebook takes a 30% cut out of all Credits-based purchases! That’s a potentially ginormous income stream for Facebook, and a significant opportunity cost for merchants selling physical items and considering accepting Facebook Credits as a method of payment for them. I’ll have much more to say about this later in this article and series.

Facebook Credits documentation

The best place to start learning about Facebook Credits is the Facebook Credits homepage.

From there you can link to a variety of consumer oriented information including:

  • How to get Facebook Credits including buying in-game or clicking on the Payments tab in Facebook accounts settings; either way you can then pay for Credits using a credit card, PayPal, Facebook Credits gift cards bought in physical stores such as Target, or mobile phone payments
  • Information on exchanging unwanted third party gift cards for Credits via Facebook partner Plastic Jungle (also a PayPal partner with the ability to accept your gift cards for PayPal credit too, by the way)
  • There’s also a link for opportunities to earn credits via special promotions with Facebook partners; think “advertising” and “cross-marketing” and you’re on the right track for many of these offers
  • A link to the Facebook Credits page which you can “like” to keep abreast of the latest consumer-oriented Credits news and developments
  • Games on Facebook, which if they allow for in-game purchases of premium items are required by Facebook to use Credits for those purchases
  • The previously mentioned Help Center page listing the particular games which currently allow for premium purchases using Credits

That’s all well and good, but I want to dive deeper to show you what’s possible for developers with Facebook Credits. To do that, we need to read up on the Facebook Credits API.

Using the Facebook Credits API

The Facebook Developers portal says the following about the Facebook Credits API:

The Facebook Credits API enables a user to use credits as a method for purchasing digital and virtual goods within a Facebook canvas application. Please note: the credits api is not yet available for use by external websites but only on canvas iframe applications.

Note this currently works only on Facebook Platform pages. Note also that it says “is not yet available for use by external websites” (emphasis is mine). I think we should be expecting an external site capability, and thereby a much broader set of merchants and usage than we have today.

The Credits API page summarizes the steps involved in making a Facebook Credits based page. They are:

  • Consumer places an order for something by clicking a “Pay with Facebook” button; order is submitted to Facebook via JavaScript
  • Facebook displays item details of the purchase for the consumer’s review
  • Assuming the consumer has sufficient Credits or stored payment credentials on file, the order is completed in-app (this is roughly analogous to an Embedded Payments flow in the PayPal X Platform); if the consumer doesn’t have a sufficient method of payment, they may be redirected to a new page to enter payment information
  • When the consumer confirms and submits their order, Facebook calls the merchant application owner’s backend to settle the order
  • Once the merchant application responds, Facebook completes the transaction and displays the results to the consumer

Facebook illustrates the detailed steps occurring during a purchase like this:

Facebook provides information on how to implement these steps in a Facebook Platform application on the Credits API page. You will need to spend some time working through that material if you are interested in prototyping Facebook Credits-based purchases in a Facebook Platform application of your own.

Click here to read the complete article on the PayPal X Developer Network including a discussion of Facebook Credits versus the PayPal X Platform.

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