Transactions as Texts: Libra, WhatsApp, and WeChat
I recently covered how Facebook’s upcoming Libra cryptocurrency has hallmarks of an crypto-upgraded PayPal, but alongside this it is important to talk about the spending revolution Libra could bring about for the billions of people who use Facebook’s messaging platforms.
When Facebook bought WhatsApp for $19billion in 2014, in what is to this day the largest acquisition made by a Silicon Valley company, there were thoughts that Mark Zuckerberg had lost the plot – although it didn’t take too long for people to realise it was likely a very shrewd move.
With the announcement of Libra, Facebook’s purchase of WhatsApp makes more sense than ever. We could be about to see WhatsApp fulfil its potential as a payment platform, much like the Chinese ‘super app’ WeChat, which in 2017 had a 37% share of China’s $17trillion mobile payment market.
Beyond this, combining Libra with WhatsApp is sure to add another angle to Facebook’s recent privacy scandals: in the same way the company has tried to reassure users with end-to-end encryption of WhatsApp messages, Libra spending could offer a similar guarantee of privacy over spending information.
Streamlining Cash Transfers and Spending
People are already able to choose from a wide variety of platforms designed to enable money transfers and online spending, but integrating WhatsApp and Libra could be a game changer for this sector.
PayPal, Venmo, CashApp, and pop-up online banks such as Monzo have become part of many peoples’ lives in the West and beyond, while platforms such as M-Pesa have transformed money transfers in parts of Africa and Asia. But these all lack two things which Libra will have in its arsenal: integration into already popular messaging apps, and cryptocurrency payments.
Previous spending platforms are just that: spending platforms. Libra has the potential to combine the ability to transfer and spend money with its own currency, and then bring this to millions immediately through already-established messaging integration.
Currently there is a break between personal communication and money transfers, at least in the West. We tend to keep these worlds separate, consider the following:
You’re not going to be messaging your friend on PayPal, and then quickly transfer them that tenner you owe them. You’re going to be messaging your friend on WhatsApp or Facebook Messenger, remembering you owe them some money, and then have to leave the chat to open your money transfer/bank app of choice to send the cash.
But what if your WhatsApp account was connected directly to a wallet containing money that can be transferred to your friend just as easily as sending a message? And what if on top of this, businesses such as restaurants or taxi companies accepted payments directly through WhatsApp without you having to leave the app? This is what Libra will become when integrated with Facebook’s messaging platforms through its Calibra wallet: sending and spending money will be as easy as writing a text.
This spending capability already exists in WeChat, and is a large part of what has made the app so incredibly successful in the Far East. But each WeChat user’s account connects to their debit card, with transactions being carried out between respective banks. Libra can take WhatsApp to a level above this as there’s no need for banks to be carrying out these transactions.
Through its Libra cryptocurrency, Facebook will enable payments with blockchain technology, taking the verification process out of the hands of central banks, and opening up a wide range of benefits for its users, not least the potential for increased privacy related to individual users’ spending habits.
Libra as a Solution to Facebook’s Privacy Problem?
Cryptocurrencies, even well-known coins such as Bitcoin and Ethereum, have struggled to gain a foothold in most people’s day-to-day spending habits partially because they feel unfamiliar and there aren’t many places where you can actually spend them. This means that their possible advantages such as lack of international transfer fees and anonymous spending have gone unnoticed or unused by people to who they may appeal.
Libra has the potential to change this. It will not only be associated with trusted apps and platforms (e.g. WhatsApp and Facebook Messenger), but will be integrated directly into them, making adoption a completely natural process.
Beyond this, Libra could offer a way for Facebook to reassure its users around one issue that has caused significant damage to the company’s reputation in recent years: privacy. The details are currently not 100% clear, but as it stands it seems that Libra’s blockchain will be managed by subsidiary company Calibra, with Libra spending data not being shared with Facebook.
If (and it’s a pretty big ‘if’ when we consider Facebook’s recent record) this turns out to be accurate, it not only goes a long way to allaying fears that Libra is just another data mining tool Facebook can use to increase ad targeting efficiency, but could give the company a possible route to regain peoples’ trust further in the wake of the Cambridge Analytica scandal.
Questions Still to be Answered
Of course there is still a large amount of concern from governments around the world about Facebook’s real ambitions with the Libra project, and regulatory bodies certainly have their work cut out to get to the bottom of these before allowing the launch to go ahead in 2020.
It’s also equally worth considering what the nature of Calibra would be as a company in the eventuality that it does indeed remain totally separate from Facebook and ends up controlling billions of dollars’ worth of Libra. With the early investors in the company including Mastercard and Visa, there is still a question to be asked relating to the extent the project represents a break from the banking sector.
If Facebook/Calibra succeed in launching a globally popular secure form of spending, then they poses a real threat to global finance and monetary sovereignty. WeChat makes spending the money in your bank account easier, a combination of WhatsApp and Libra could be a challenge to the very idea of what constitutes a bank account, and then who knows how deep the rabbit hole might go?