Facebook Inc. has long been the social media giant. Now, it may become a formidable player in the rapidly growing industry for cryptocurrency and digital payments. Given the massive estimated base of MAU (monthly active users), of 2.375 billion, it is virtually everywhere. Facebook has the potential to become a major competitor to payment processors such as PayPal Holdings Inc., Visa Inc., and Mastercard Inc., as well as the banks.
The plan laid down by Facebook, inclusive of creating a large open cryptocurrency system will draw intense scrutiny from US regulators and those abroad. An open system will encourage commerce over the system run by Facebook. This is because an open crypto system is more liquid.
Facebook, which is also the owner of Instagram and WhatsApp plans to launch the payment platform by the first quarter of 2020. It will be available in about a dozen countries. The cryptocurrency is provisionally called GlobalCoin. It will be under testing early this year. As per a report from the BBC, the company has been in discussions with the Bank of England and the US Treasury, for its plans. According to the Wall Street Journal, the GlobalCoin may be used in various ways by Facebook. One for instance, is rewarding the users who look at ads on its social media sites.
Key Facts: GlobalCoin
- It is part of the Project Libra
- The launch is predicted for 2020 quarter 1
- Online merchants may accept the GlobalCoin
- Users will be able to exchange liquid money for the GlobalCoin
- It is a digital currency
- The key target shall be individuals who do not have bank accounts
- It will make transfer of money cheaper and faster
While the venture by Facebook has a disruptive design, the company is working with existing payment processors. This will facilitate the launch of its own payment system. Moreover, Facebook seeks a total investment amounting to $1 billion for this project. This is expected from a consortium which will include a few firms and e-commerce companies.
Merchants are eager to do away with the 2 to 3% of transaction fees which is currently charged. Payment networks, payment processors and banks charge this fee. However, it is quite unclear whether these existing networks will camp to participate in a project which aims to undercut their competitive position.
What will come out of this venture by Facebook is yet not clear. And the world is waiting eagerly.