January 28, 2013 at 15:22 PM EST
Facebook Quietly Tightens Its PayPal Payout Policy, Now Requires Extra ID In Countries Like China, Brazil, India, And Israel
As Facebook continues to build out the App Center and its overall business as a platform for third parties, it's also tightening up how payment policies work within it. In one of the latest moves, the company has changed how it pays out to PayPal accounts for new (not existing) developers who select that option. Specifically, Facebook requires extra levels of authentication for new developers in certain countries, including large, emerging markets like China, India, Brazil but also some mature countries such as Australia, Japan and Norway.
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As Facebook continues to build out the App Center and its overall business as a platform for third parties, it’s also tightening up how payment policies work within it. In one of the latest moves, the company has changed how it pays out to PayPal accounts for new (not existing) developers who select that option. Specifically, Facebook requires extra levels of authentication for new developers in certain countries, including large, emerging markets like China, India, Brazil but also some mature countries such as Australia, Japan and Norway.

The extra authentication comes in the form of identification such as incorporation papers for the developer’s business, and is in line with what Facebook requires for those who request to be paid directly into bank accounts in the same list of countries.

As I understand it, the change has been made to help mitigate risk on payments out to those countries and help build out the credibility of the platform, rather than as a move to restrict payments via third parties, or in response to reported problems, or anything of that sort. And again, existing developers are not affected.

Facebook holds money transmitter licenses in several states in the U.S., as well as in individual countries internationally. These are required for companies that accept and transmit electronic currency, and so moves like this one are often made to get in line with regulations around those licenses. Other companies that hold such licenses include Amazon, Google and PayPal itself.

The full list of countries affected by the change are Argentina, Australia, Brazil, China, French Guiana, Guadeloupe, India, Indonesia, Israel, Japan, Malaysia, Martinique, Mexico, New Zealand, Norway, Philippines, Reunion, South Korea, Switzerland, Taiwan, Thailand and Turkey.

Meanwhile, new developers in another set of countries — including the U.S., most of Western Europe and a few others — will not be required for extra authentication. That full is is United States, Canada, United Kingdom, Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Singapore, Slovakia, Spain and Sweden.

The news of the the change in PayPayl/Facebook policy was first reported last week by the blog Bank Innovation — although when I ran that story by Facebook for a comment, I was told the blog got the story wrong by saying that Facebook was eliminating PayPal payments to those countries altogether.

It’s unclear how many developers are on the Facebook platform today. Facebook notes that as of March 2012, some 9 million apps are integrated with Facebook — although it’s not clear how many are actual Facebook apps that use its payout system for revenues made from credits and in-app purchases.

In 2011, there were about 550,000 apps on the platform, and given the emphasis the company has put on the App Center in the last year, that number will certainly have grown. In that sense, the need to keep the platform as secure as possible is essential in Facebook’s effort to make the service generate more revenue and more profitable.

Facebook declined to comment on whether it planned in future to take on any of the payments services that eBay-owned PayPal currently handles for developers, something else that a money transmitter license would permit. In the past, PayPal has created other transactional products that Facebook has declined to develop itself, for example its Send Money app that lets Facebook users send money to each other, via a PayPal-powered Facebook app.


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