Morgan Stanley: Facebook Payments May Help Visa & Mastercard Investors More

In a report published Wednesday, Morgan Stanley analyst Smittipon Srethapramote commented on Facebook Inc's (NASDAQ: FB) person-to-person payments service on Messenger that allows users to send money to each other using debit cards.

"We view this as an incremental positive for the networks as this service is being powered by Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA) debit cards only, in contrast to several other P2P services that drive a substantial portion of their volume through direct links to checking accounts," Srethapramote wrote. "Although we don't expect this to be a meaningful revenue contributor in the near/medium term, given Facebook's large user base(we estimate nearly 200mn in the US) we think this partnership offers Visa and Mastercard a nice beachhead into P2P payments, a market still dominated by cash/checks."

Srethapramote expanded that peer-to-peer payments is not "surprising" following the appointment of PayPal's former President David Marcus to lead Messenger in June 2014. The analyst continued that the hiring was consistent with Facebook's plans to leverage its platform and increase its user offerings and engagement.

Bottom line, Srethapramote stated that a payment service may lead to incremental Facebook operating expenditure and adoption rates or user demand are still unclear, given the "lackluster" success Google Inc (NASDAQ: GOOG) had when it rolled out a similar Gmail product.

Nevertheless, a payment platform "will be important to monitor" and could create incremental long-term monetization opportunities for Facebook and WhatsApp as part of a larger payment or eCommerce platform.