By CCN Markets: Facebook’s foray into cryptocurrencies with Libra has met with a ton of mixed reactions. While some are going gaga over the social media giant’s latest effort that’s supposed to enable cross-border payments at the tap of a button, the traditionalists are taking a dim view.
Governments across the globe are calling for strict scrutiny and regulation of Libra, but there’s one category of people who are really afraid of what Facebook’s cryptocurrency can do.
Facebook takes aim at the banking system
Banks, it seems, are shaking at the sight of Facebook Libra. The banking system is afraid that they will be rendered as dinosaurs in a fast-moving world where payments are becoming incredibly fast, cheap, and convenient. This is evident from the comments made by National Australia Bank’s (NAB – one of Australia’s ‘big four’ banks) business banking head Anthony Healy, as reported by the Sydney Morning Herald:
“They’re not the first company to launch a crypto payment solution, but they do have immense reach obviously through their Facebook platform. With a billion plus users on its platform, it is clearly a threat.”
Facebook’s intentions are clear from the fact that it has not included a single bank in the Libra Association.
The inclusion of payment processors and other tech upstarts – crypto exchanges included – clearly indicates that the company is looking to bypass the banking network in a bid to knock down the barriers and get straight to the consumer.
For instance, you wouldn’t need a bank account to fund your Uber ride, as you can simply use Libra to do the same using a payment processor such as Visa or PayU. Or you can visit your local Walmart and make a payment using Libra.
More formidable than bitcoin
This effectively tells us that Facebook Libra is on track to replace bitcoin as the global banking industry’s biggest threat. So far, the likes of JPMorgan have railed against bitcoin while global governments have tried to kill the flagship cryptocurrency through hostile measures.
But Facebook has massive reach. Statista reports that Facebook had nearly 2.38 billion users at the end of the first quarter of 2019. This is way, way higher than the 35 million people using a blockchain wallet at the end of the quarter.
While bankers and governments have been allowed to have their way with bitcoin, they can’t do the same against Facebook because of its humongous size. The social media giant virtually runs public sentiment, which is evident from the key role that Facebook and its properties such as WhatsApp have played during elections in different countries.
Facebook’s massive size and reach allow it to take the traditional banking system head-on with Libra and change the status quo. And Facebook has enough incentive to do that. According to Fundstrat Global Advisors’ founder Tom Lee (via CNBC):
“One thing to keep in mind [is] Facebook’s annual revenue per user is probably $50. That might be a little high. But an average bank generates close to $1,000 per user. So, Facebook has a 20x upside to their customer model if they start doing banking services, and so I can see why banks aren’t really enthusiastic about this.”
The bottom line is that Facebook is trying to create a parallel financial system to change the way we spend money in our daily lives. All you’ll need is just a smartphone. No cash, no cards, and more importantly, no bank!