Web Summit 2019: Facebook's New Cryptocurrency, Libra, Can Pave the Way For a New Financial Infrastructure

After a very informative visit to the Web Summit 2019 in Lisbon, I am left with a lot of ​​inspirational impressions and reflections. One of the most compelling presentations was from the Vice President of Calibra, Kevin Weil, who talked about the launch of the new cryptocurrency, Libra, and the related digital wallet, Calibra. Why am I writing about it? Because it has the potential to change the entire financial infrastructure and the way we pay in the future.

In June 2019, Facebook lifted the veil for the new cryptocurrency, Libra. Contrary to the cryptocurrencies that most of us know already (Bitcoin, Ethereum, Ripple, etc.), it is intended for Libra to act as payment rather than an investment object.

One of the things that has motivated Facebook to innovate in an area like cryptocurrency right now is the huge impact that the internet has had on telecommunications. Think, for example, 30 years back (if you can) when you might text or call around the world, but it cost you a fortune. When the internet came into the picture, competition increased significantly, and it became possible to write and call around the world for free with help from Skype and instant messaging.

Libra will try to follow this line of thinking by allowing the currency to be sent anywhere in the world – free of charge and without delay. That, in itself, would allow more of the 1.7 billion people who do not have access to the same financial infrastructure as others, to have digital savings and send and receive currency – if they have a smartphone.

What will it matter then?

Assuming that Libra follows roughly the same evolution as telecommunications did after the internet announced its arrival, this will probably significantly increase competition and thus pave the way for a more innovative financial infrastructure – and Libra will allow others to build services on top of this infrastructure.

But what would this mean for the banks? Basically, this would mean that tech companies that choose to develop digital wallets and other Libra-compliant apps can slowly begin to give banks competition.

In addition to the cryptocurrency Libra, Facebook will launch a digital wallet, Calibra, that will help revolutionise the way we transfer currency to each other. Calibra will build on two simple functionalities, enabling anyone with a smartphone to:

  1. Keep their currency safe
  2. Send currency to any person or business in the world, promptly

Calibra will be launched as a standalone app and integrated into Messenger and WhatsApp. And this is where it gets interesting. Facebook already has a massive user base on Messenger and WhatsApp. The idea of ​​being able to send currency to any person in the world, right where the communication is, makes good sense.

What could be of importance to digital business?

In the long run, this has the potential to lead to more interactive online shopping experiences. The use of Messenger and WhatsApp may play a more significant role in corporate digital strategy and help create more service-based services for customers.

As Kevin Weil himself says, Libra is not expected to spread as fast as other social networks, and it may even take decades before it has seen its full potential [1].

Do you trust Facebook enough to leave your savings with them?

While many may not have a lot of trust that Facebook can take over some of a bank's functionality, Facebook reports that they will only have 1% ownership in Libra through its Calibra subsidiary. There are currently 21 companies that have agreed to be part of the Libra organisation, and the goal is to have 100 partners before launching in 2020.

That way, Libra will try to reassure users that it is not just a Facebook product. In addition, Libra and Calibra will guarantee the same security requirements and measures that banks and credit cards have today.

Libra’s future

Prior to the planned launch of Libra and Calibra in 2020, the organisation faces a huge challenge in terms of acquiring and retaining the necessary partners. This will, among other things, be crucial to getting a foothold in the Western world before competitors from Asia enter the picture.

In China, there are already several tech companies, such as WeChat, that have begun to move into the banking world. Mark Zuckerberg has, therefore, stated that he thinks it is time to do something about the financial infrastructure in the West before being overtaken by Asian tech companies [2].

And it's not just Facebook that has begun to position itself where the consumer's money is. Google has also just announced that it will offer a smart checking accounts service [2]. All of this testifies to the fact that the big tech companies want to create more convenience for the consumer.

But has the consumer considered that these ‘free’ services also have a price… personal data?

If you are curious about the growing interest tech companies have in financial infrastructure, you can read more in the following articles. 

 

Sources:

[1] CNBC; https://www.cnbc.com/2019/11/05/facebook-calibra-vp-product-kevin-weil-discusses-libra-at-web-summit.html

[2] BBC; https://www.bbc.com/news/business-50412568

[3] Headerbillede – Web Summit Flickr; https://www.flickr.com/photos/websummit/albums/72157711626866013