Earlier this week Facebook unveiled its plans to launch a new blockchain-based payments network called “Libra.” The announcement came after a lot of speculation over whether Facebook would be making an entry into the global cryptocurrency markets and how that might impact Facebook’s 2 billion global users.
In case you missed the announcement, here are a few quick takeaways from the Libra announcement:
- While Facebook is the primary creator of the network, over 28 companies were involved in co-founding the “Calibra initiative” include Visa, MasterCard, PayPal, Andreesen Horowitz and Uber.
- Libra will act as a global currency, leveraging blockchain technology in order to serve unbanked consumers around the world.
- Libra has its own coding language, which Facebook is touting as efficient and secure.
- Facebook’s engineers are designing Libra’s interface to be friction-free – and presumably familiar to Facebook’s billions of users.
Given that payments is now a $110 trillion industry, it is not surprising to see a large social media platform like Facebook try to jump into the space. What this new payments network will actually mean for the future of payments – and financial services as a whole – remains to be seen.
“We are waiting and watching,” says Arun Kallikadavil, CO-OP’s Head of Data Strategy and Delivery. “Facebook’s announcement offers some interesting details, but we’ll have to wait for the platform to come out to really learn about how it works.”
Kallikadavil highlights that there are numerous regulatory and privacy hurdles Facebook will have to navigate in order to launch and operate a network of this size and scale. He points out that Facebook has had its fair share of regulatory scrutiny and issues with consumer trust in the past; adding payments into the fold will only make the situation more complicated.
Meanwhile, Facebook’s announcement only reinforces for credit unions how important payments are today with their members.
“Ultimately, everything is transforming in terms of how we operate,” Kallikadavil says. “If you look at the new generation of consumers, they’re moving more and more towards digital payments as their primary avenue to move money. It’s all about convenience: They don’t want to log into multiple places, have multiple accounts to manage. At CO-OP, this is why data and technology integration is so core to everything we’re doing. Once we see the intersection of where blockchain and payments is happening, we can see where our credit union ecosystem might fit in.”
Not sure what to make of Facebook’s Libra announcement? Here’s a roundup of 5 perspectives on what it could mean for credit unions and the payments industry:
1. Facebook’s Libra Is Already Hitting Turbulence
It hasn’t even been a week since Facebook announced Libra and already concerns about money laundering, consumer trust, the new currency’s impact on the global financial system, and the specter of regulation are potentially slowing its momentum.
2. What the Launch of Facebook’s Libra Means for Payments
PYMNTS CEO Karen Webster goes in depth on Libra and Calibra’s founding – how the technology works and the implications, particularly as they relate to the payments industry and consumers at large.
3. Facebook’s Cryptocurrency Project: Who’s In and Who’s Out?
There’s one category of payments player conspicuously absent from the founding members table of the Libra project: banks and credit unions. Could this be a sign of an impending battle for payments marketshare?
4. Facebook’s Digital Currency Will Open a New Front for Regulatory Trouble
Whenever radical innovation is introduced to financial services, you can bet the regulators will be heavily involved. In this case, cryptocurrency is already under close watch by federal agencies across the globe, which signals Facebook may be heading for a “new regulatory minefield.”
5. Consumers: Why Facebook’s Libra Coin Could Become a Major Pain in Your Wallet
The vision of Libra is to make the movement of currency into a frictionless experience. But is that actually always good for consumers? In this article, behavioral scientists highlight the value fiat currency has in making money feel more tangible in a consumer’s bank account, and argue that painless payments on the blockchain might give way to massive overspending.
While Libra and cryptocurrency promise to bring the financial revolution of tomorrow, today payments have already become the gateway to primary financial institution (PFI) status. Which is why credit unions should be laser-focused on developing a comprehensive payments strategy and integrating with the latest payments technology in order to build and retain member loyalty.
Join us at one of our upcoming Roadshows as our experts discuss the future of payments, technology and the credit union industry and how CO-OP is building a payments and technology ecosystem specifically for credit unions. Register now: