It makes sense that Facebook is testing Places integration in Instagram. Getting users to use Facebook’s own check-in system keeps them using Facebook products. Facebook could also advertise to users with suggested restaurants, bars, and other locations.
Location data is also valuable for Facebook to analyze where its users are going and to anticipate their needs. With Instagram’s library of photos and check-in data, Facebook could make personalized suggestions based on where your Instagram friends have been.
Source: Fast Company