Australian banking executives have described Facebook’s plan to develop its own cryptocurrency as a clear threat to the business, however payment experts were skeptical regarding its potential impact on the local financial sector.
“They’re not the first company to launch a crypto payment solution, however they do have large reach obviously through their Facebook platform,” said NAB’s business banking Chief Anthony Healy.
“With a billion plus users on its platform, it’s clearly a threat.”
With over a billion users on its platform, Mark Zuckerberg’s crypto payment strategy at Facebook is clearly a threat.
Asher Tan, the founder of bitcoin exchange CoinJar, said the very fact that no bank has been named among the initial partners for Facebook’s Libra consortium – which will govern the crypto currency – said lots regarding its intent.
Facebook will “probably go straight to retailers and other strategic partners, and bypass a lot of these traditional gatekeepers,” said Mr. Tan.
In a sign of bank concerns about the likes of Facebook, NAB chairman and former Treasury Secretary Ken Henry said in late 2017 that banks could be “challenged beyond our ability to cope by the big IT platform providers.”
There’s an issue that has to be asked, particularly for Australia. What pain point is it attempting to solve?
But other observers questioned what benefits it would provide consumers over existing payment platforms.
David Ojerholm, of payments consultancy The Initiatives group, said that whereas there might in the future be benefit in using Libra for cross border payments, it was not clear why highly-banked Australian consumers would want to exchange dollars to Libra in order to make purchases domestically.
“There’s a question that has to be asked, particularly for Australia. What pain point is it attempting to solve?” he said.
“What issues do payers have, that something like this might provide a better experience for them?”
And even if Facebook’s proposed crypto currency did become popular, people in Australia would still use a bank account in order to buy Libra tokens. The payment infrastructure would additionally rely on existing banks’ systems and relationships with merchants.
“At least in the short-to-medium term, there seem to be lots of points where the bank will still be involved” Mr. Ojerholm said.
And whereas there’s many skepticism regarding how Facebook would handle the regulatory challenges of effectively creating a new world currency, the larger challenge may be ensuring the successful adoption of the platform by customers.
Fellow tech firms Apple, Google and Samsung have already moved into financial services via “digital wallets,” which allow customers to use their smart phones to make tap-and-go purchases.
However, these services still use the banking industry’s financial plumbing, and they haven’t taken off with users.
The latter issue could heavily influence who Facebook chooses as a possible Australian member of the Libra consortium, according to mister Tan.
The inclusion of partners like Uber, Spotify and Ebay “shows they want business traction, so I think a natural partner would be someone who has a strong retail following in Australia,” he said.
The Libra consortium additionally has to give the currency’s ecosystem the credibility to encourage businesses to share customers, information and payments in a way that benefits everybody.
“If it’s successful, it’s not just going to have the traditional qualities of a company currency like Westfield dollars or, Qantas Frequent Flyer points, it’s really a governance play,” said Mr. Tan.
Even if it’s successful, Facebook’s currency model could provide new opportunities for the banks to emulate, according to Mister Healy.
Banks are also looking at payment solutions using blockchain, and if Facebook developed a “compelling proposition,” banks could consider replicating it.
“Like all fintech disrupters, they’re all potential threats, however they’re additionally opportunities for us to find out, and if some of these emerge as real threats we can learn from them, develop our own capabilities and respond appropriately.”