Facebook is on course to achieving an integrated platform that will include a payments app in addition to its popular social media apps such as WhatsApp and Instagram. A recent update by Facebook to its users about the pending release of the Facebook Pay suggests this vision is getting closer to reality.
Enter Facebook Pay
It appears Facebook has been working on another payment platform as a separate project from the controversial Libra crypto token. Facebook Pay is part of the social media giant’s grand plan to create a permanent utility for its applications.
In a statement recently released, Facebook said;
“Facebook Pay is part of our ongoing work to make commerce more convenient, accessible and secure for people on our apps. And in doing so, we believe we can help businesses grow and empower people everywhere to buy and sell things online. We’ll continue to develop Facebook Pay and look for ways to make it even more valuable for people on our apps.”
The statement seems to suggest that Facebook has conducted a test run for this product and is confident that users will embrace it.
The low profile approach used on Facebook Pay implies that the social media giant understands it has a tainted image, one which makes it difficult to roll out a new product. It gets more complicated when that new product enables the company to handle more sensitive data.
Many feel that Facebook has not adequately addressed previous problems like how third parties breached the network and accessed sensitive user data.
So in order for any of its future projects to be mildly palatable, Facebook created working alliances with different groups that do not similarly share a public goodwill deficit like itself. The alliance partners are drawn from different spheres ranging from payment processors to non-government organizations and together they make up the Calibra Association, the organization behind the proposed Libra stablecoin.
According to the Libra whitepaper, MasterCard, Visa, Paypal were some of the payments companies that constituted the ‘Founding Members’. The list also includes technology firms like eBay, Lyft, Uber as well as institutions like Mercy Corps and the Women’s World Banking.
Some founding members have since left the association following pressure from the US government and others. Despite of such setbacks, Facebook insists it will go ahead with the project.
While Facebook has seemingly taken a strong stance on Libra, it is the revelation that it has been working on an alternative payment platform (to Libra) for its users that comes somewhat as a surprise. While the Libra whitepaper makes it patently clearly that the stable coin will only move ahead once the concerns of regulators and governments are resolved, development of Facebook Pay—which appears to be a fail safe measure in case Libra is torpedoed—has apparently continued without having to face the same scrutiny or hostility from regulators.
Facebook is on course to morphing into this too big to fail monolithic empire since it boasts the numbers to do this already. The addition of financial services to its product mix brings the company’s vision closer to reality.
Already popular apps like Instagram and WhatsApp are already being packaged as part of this one social media giant. The addition of Facebook Pay will only enhance the appeal and influence of Facebook, a doomsday scenario for many opponents of the tech giant.
At the moment, it is not clear if Facebook Pay harnesses the blockchain technology, but it is also safe to assume that this envisioned payment platform will use the blockchain in some way. Currently the blockchain is the only secure and scalable technology that can support any trustless global payments platform.
The Libra whitepaper already suggests that Facebook and partners may have been working on an alternative blockchain that will be scalable, secure and stable enough to support billions of transactions that the stable coin is expected to handle. So it is quite reasonable to believe that Facebook will use the knowledge gained while working on the Libra blockchain to build supporting infrastructure for Facebook Pay.
The distraction achieving objectives
Whilst discussing with Jonathan Fennell, Founding Partner of AfricaBlockchainAdvisory.com, he speculates (and apparently has done since Libra was first heard of), that:
“My guess is Facebook may have been using the Libra project as a diversion tactic the entire time. By proposing to create a token that threatens the US dollar’s global dominance and the reach of American power, Facebook knew the kind of backlash that would follow. This would have potentially distracted from Facebook’s moves towards a merger of its top properties as well as its incoming Facebook Pay, all of which were taking heat prior Libra. With the announcement of Libra, all attention appeared to turn towards this. Oldest magicians trick in the book”.
Indeed politicians—particularly US congresswoman Ms Maxine Walters—have taken a hard-line stance towards the proposed Libra token. Specifically, Ms Walters wants Facebook to halt any further development of Libra whilst the US government tries to understand the media giant’s real intentions with token. Separately, some members of the US congress have resorted to using strong arm tactics and as noted earlier, this has resulted some in some Calibra Association founding members withdrawing.
So in keeping with this grand scheme, Facebook is now informing the public about the pending roll out of a product that apparently adheres to the standard regulations even as the focus is still on Libra. The plan would be for users and regulators to see Facebook Pay as a better and acceptable option to Libra. The idea is that by the time Facebook Pay is finally rolled out, there might be no time for governments to react in ways similar to what they have done with Libra.
Facebook may have learnt a lesson or two from the way regulators and politicians react when they are given a warning well in advance. The reaction is even more muted when there is not enough knowledge about the topic.
For example, when the bitcoin whitepaper was released there was not much hype about this because of the general ignorance that prevailed at the time. Today politicians and regulators now grudgingly accept that bitcoin has a place because it’s a little too late to stop it and that may be a similar approach taken by Facebook on this payments platform.
But just why is Facebook pushing hard to break into this space even as it faces all these obstacles?
Why Facebook is pushing hard
Facebook is determined to offer financial services and by creating a conversation around Libra, it may have given developers of Facebook Pay breathing space to perfect the product. So far the grand plan is working, the social media giant remains on course in its quest to offer borderless financial services potentially to billions of people.
Of course there is no evidence supporting this whole assertion (that Libra is a diversion); it could well be just conjecture after all.
Nevertheless, Facebook has a history, a tainted one for that matter and given this, it may not be entirely surprising that it has pursued two projects that have strikingly similar objectives.
It is within this context that observers may be forgiven for drawing conclusions as those highlighted above. However, the real story will come out once Facebook completes a roll out of this.
Whichever is the case, it is Facebook’s insistence on entering the financial services market that attests to the fact that this market is now evolving. Those choosing to ignore or to stop this evolution will be found on the wrong side of history. As it is now, regular financial institutions have failed to reduce the number of the unbanked adult population something only technology companies appear to be adept at.
Therefore, stopping Facebook Pay or the Libra project will not achieve much because something similar will emerge elsewhere and the US government will have little to no influence of stopping this. As events in Asia in the past few months have proven, we may have reached that point.
China taking the lead
Asian countries like Japan seem to have a better understanding of this technology and that is why this country became the first country to give legal tender status to Bitcoin. In Asia continent efforts are ongoing to help the blockchain and crypto token market grow in an orderly way.
Recently the Chinese government signaled its intention to lead in this space after it passed legislation cryptography law, an admission of the importance of the blockchain technology.
In fact, it is the Chinese President Xi Jinping who is seen fronting this policy shift by Beijing and now— rather oddly— it is the Chinese state owned media that is lauding bitcoin as the blockchain technology’s first success story. Many western governments and their respective mainstream media are yet to come to the same conclusion.
China itself is on course to launch its own central bank digital currency (CBDC) and some commentators now contend that it is this CBDC that is a threat and not Libra.
It is perhaps against this background that Facebook is fighting for its own share of this lucrative market. Europe and America leaders are yet to grasp this and Facebook as well as other players in this market are not going to wait for the former to finally come around.
Technology giants as well as startups will take risks because for them, the end will justify the means. The reality is that the world’s poor need these financial technologies and there is a potential to profit from their provision.
Laws that attempt to kill financial innovation will be passed but these will be ignored or circumvented because serving human needs surpasses any security fears behind the enactment of such laws.