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.”