U.S.-based internet giant Facebook has announced its intention to launch a mobile money platform in 2020, based on its own cryptocurrency Libra, which will debut by the end of 2019. The Calibra digital wallet, which is designed to make it easy to save, spend and transfer money over the internet, will be available in Facebook Messenger, via Facebook-owned WhatsApp and as a standalone app, the company said.
Facebook said the new service aims to reduce financial exclusion, as many people around the world still lack access to basic financial services. With it, users will be able to send Libra over the Calibra wallet “to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost,” Facebook said. In time, it plans to offer additional services for consumers and businesses, like paying bills with the push of a button, retail purchases via code-scanning and public transit rides without needing to carry cash or a pass.
The company promised security protections “using all the same verification and anti-fraud processes that banks and credit cards use,” as well as automated systems that will proactively monitor activity to detect and prevent fraudulent behavior. Live customer support will be available.
Facebook also pledged not to use Calibra customers’ account information and financial data to improve ad targeting on the social network or its other apps. In limited cases, personal data may be shared “to keep people safe, comply with the law and provide basic functionality to the people who use Calibra,” Facebook said. Any other data sharing with third parties or other Facebook services will require prior consent from users. The company noted that the Calibra service is still in development and that it will be consulting experts “to make sure we can deliver a product that is safe, private and easy to use for everyone.”
Mobile money platforms are a major force in the mobile telecom market today. They originated as a source of liquidity for the unbanked in developing economies and have expanded rapidly over the past several years to provide financial services of many kinds to users at all levels of wealth and sophistication. Concomitantly, the range of goods and services that can be paid for via mobile money platforms has also greatly widened.
In this context, Facebook’s intention to enter into the mobile money sphere should be taken very seriously—and particularly by mobile operators. MNOs have taken the lead in creating and spreading mobile money platforms. The most important service worldwide, M-Pesa, was developed by Vodafone for Safaricom in Kenya and Tanzania and has gone from dominance in Africa to success in India, Egypt, and Eastern Europe. Other operators have started their own mobile money services, either on their own or in partnership with banks.
For Facebook to create its own is a major challenge thrown down to operators, not only because Facebook is not an MNO but because of the company’s worldwide reach, deep pockets and vast pre-existing user base of nearly 2.5 billion. MNOs have already dealt with incursions into their traditional areas of business by disruptive players such as OTT providers; now they face a challenge in one of their innovative, non-traditional spaces.
However, we should ask ourselves to what extent Facebook can challenges the MNOs with respect to mobile money. The social-media giant is basing its forthcoming service on an as-yet-unlaunched cryptocurrency, not on national currencies. While cryptocurrencies such as Bitcoin now appear to be finding favor in the global marketplace, the sector has been plagued by controversy. As recently as 2018, Facebook itself banned cryptocurrency advertising on the grounds that many of the offerings were “not currently operating in good faith.” In addition to possible concerns over pyramid-scheme-like cryptocurrency fraud, privacy is likely to be a serious issue when it comes to Facebook’s Libra. While the blockchain technology on which cryptocurrencies are based promises high security, that assurance may well be considerably offset by widely-expressed worries about Facebook’s alleged violations of users’ privacy, for which the company is facing massive scrutiny. And although Facebook is touting the Calibra mobile money wallet as a boon to the unbanked, it is unclear whether a cryptocurrency will fit the needs of users in developing economies.
A useful way for MNOs to respond to Facebook’s mobile-money challenge would be to focus on the issue of privacy and security. Operators already have a reserve of customer goodwill to build on, and they should remind their subscribers that they have already been keeping their financial and other data secure and will continue to do so.