One month into the post-Libra world, we asked W.UP’s VP of Business Development, József Nyíri, what opportunities and challenges he thinks the new currency will bring to the table.
As far as product launches go, let’s just say that Facebook’s new digital currency hasn’t been off to a flying start. Here’s a quick recap: just days after the project’s unveiling, The New York Times reported that even some of the Libra Association members were on the fence about how it would play out. Federal Reserve Chairman Jerome Powell has come forward with a litany of concerns, from privacy through money laundering to financial stability.
Meanwhile the SEC is still trying to figure out if Libra falls into the category of exchange-traded funds, which would effectively make it subject to the commission’s oversight and point to further bumps down the road. Plus news just broke that a draft proposal is making the rounds among US lawmakers, simply referred to as “Keep Big Tech Out Of Finance Act”. Subtle.
You know by now that Calibra, aka your Libra digital wallet, will let you wire money to people with the ease of sending an emoji. Plus you will be able to pay in Libra for all kinds of everyday purchases. What purchases exactly is not 100% clear just yet. All we know is that Spotify, Uber and Lyft are among the association’s founding members so they definitely seem eager to get into our crypto wallets. So much so that there are talks about specific discounts in the works to incentivise Libra payments.
A real big-hitter here, József thinks, is eBay. “If customers can pay for their orders on eBay, that’s going to be a huge use case for Libra. Just think of the billions of dollars involved,” he explains. He continues: “You will essentially be able to make money on these platforms and spend it right away without using a bank and paying transaction fees. And what’s even more interesting to me are the money transfers between people or companies for products and services that are sold elsewhere. If I want to pay, let’s say, my babysitter in Libra, all we’ll need is our phones and an app. This will completely rewrite the rules of how people handle payments, and in broader terms, money.”
Libra: Venmo on acid
Libra, however, promises to be more than just a shiny new payment infrastructure. “It moves away from other payment platforms in terms of technology, too. When you think of Venmo or PayPal, there’s always one big corporation who keeps track of your transactions, balance, spending, purchase history, you name it. In the case of Libra, the whole process is decentralised. Your financial data is handled by multiple member organisations, meaning that none of them can use it to their advantage as it pleases,” the financial services expert says. Which also means more robust data security measures. Not only is the entire currency built on “secure, scalable, and reliable Blockchain”, as Facebook’s Libra white paper says, “the Libra Association will oversee the evolution of the Libra Blockchain protocol and network, and it will continue to evaluate new techniques that enhance privacy in the blockchain”. Which of course still begs the question: with Facebook’s disastrous track record for user privacy and security, why would anyone trust it with even more personal data?
To make life easier, in short. Experian’s 2019 Global Identity and Fraud Report, for instance, found that 70% of consumers have no qualms about sharing more personal data in exchange for cushier online experiences and added safety. And that’s no small threat to incumbent financial institutions. Or any financial institution that won’t measure up to the speed and convenience of Facebook’s trailblazing payment service, for that matter. József explains: “To my mind, the question is not whether or not Facebook has now officially entered the financial services ecosystem. It’s more about how this ecosystem will evolve if Libra takes off, and people get more and more comfortable with using cryptocurrencies. Once they start trusting this new way of sending, receiving and storing money, there’s a very good chance that users will be much more open to signing up for other financial services, like loans, should Facebook ever decide to foray into this territory.” Speaking of Libra users.
Overcharged and underbanked
Who will be these mythical Libra users? Or who does Facebook expect them to be? “I don’t think Libra will make a big splash in countries with a mature financial services industry, where most people already have multiple bank cards and bank accounts. But in developing countries, where only two out of ten people have a bank account, it can be a game-changer. In certain parts of Asia, for instance, it has every chance to become not only a viable alternative to traditional banks but the primary means of managing personal finances,” József predicts. Though Libra’s hassle-free approach is bound to appeal to a lot of users, banked and unbanked alike.
“You won’t have to go to a branch, and fill in and sign a bunch of forms. All you have to do is download an app and you’re all set. It will be faster, cheaper and easier than anything most traditional banks can offer,” he adds. If this doesn’t exactly sound like knee-slapping news for established financial service providers, it’s because it isn’t. “The rollout of Libra will definitely put a lot of pressure on existing peer-to-peer payment platforms and money transfer services. And traditional banks will be next.”