Share of Global Consumers Who Would Switch to a Big Tech Provider for Banking Services, by Segment
Facebook is in the process of finalizing plans to launch its crypto in 2020, reports the BBC. The social media giant will roll out the digital currency in around a dozen countries by the first quarter of next year, with the company planning to begin testing for the crypto, internally dubbed GlobalCoin, by the end of this year, according to the outlet.
Here’s what it means: Facebook has tech and resources, but trust will be the currency that’ll really determine the success of its crypto project.
Facebook’s considerable resources have enabled it to make significant headway on its crypto project already. We reported last week that it registered a new fintech company, dubbed Libra Networks, in Switzerland as part of its efforts to move into financial services and crypto. The company has also sought advice from regulators in the US and the UK, with Mark Zuckerberg having already spoken to the head of the UK’s central bank about the opportunities and risks involved in launching a crypto, according to the BBC. Facebook has also reportedly held talks with a number of financial services firms, including two crypto exchanges, in an effort to provide users of its own crypto with access to safe storage and enable them to convert the digital currency into other cryptos or fiat currencies, per the Financial Times.
But its recent privacy woes will be a major roadblock it needs to overcome. Across the past 18 months, Facebook has been embroiled in a number of scandals that have provoked the ire of its user base and regulators alike. Last year, for instance, the company became the center of a major scandal when it was revealed that 87 million users’ data had been illegally obtained by research firm Cambridge Analytica. Since then, the firm’s had to contend with a steady stream of similar data privacy issues and breaches. If Facebook is to make a success of its crypto and convince enough of its current user base to use it, the company needs to act fast to build trust and change the negative perceptions around it.
The bigger picture: Yet, if any firm can push through mass crypto adoption, it’s Facebook; for incumbents, that’s a big problem.
Facebook’s huge user base offers it a significant leg up for its crypto push. Mass adoption of crypto remains a way off, with a constant flow of hacks and illegal activity continuing to deter consumers. However, with more than 2 billion users, per the FT, across its core platforms, Facebook has a huge ecosystem of users it can provide new value for using the nascent asset class. Its crypto can reduce friction for these users, enabling them to make purchases or make transfers to each other without having to leave the platform, for instance. This is particularly problematic for incumbent financial institutions (FIs), because the company stands to disintermediate them, or at the very least push price points down considerably and eat into their revenue. And the likes of WeChat in China have shown how successful these efforts can be, making Facebook’s financial services push an alarming threat for FIs.
But for forward-looking FIs, there’s also an opportunity to work with Facebook and stake a strong position in the space.Facebook’s regulatory struggles don’t bode well for its efforts to enter financial services, not least because of the substantial compliance burdens FIs have to content with. The challenge of navigating this regulatory terrain can provide fast-moving FIs in jurisdictions Facebook plans on offering its financial services products to with an opportunity to partner. In this way, the social media giant can focus on serving its consumers and lean on FIs to tap into their deep regulatory know-how and expertise. The recently announced partnership between Apple and Goldman Sachs to roll out credit cards is a prime example of how effective this route can be for both big tech firms and established FIs.
Via Business Insider