David Cullinan

Blockchain, crypto & fintech writer. UK born, citizen of the world.

As the Western World Gets Nervous About Facebook Libra, well, We might Not Be The Target Market

Since the social media giant’s announcement that its rumored new digital currency was a reality, the internet has exploded with predictions of doom and gloom

Like everyone else with more than a passing interest in the tech space, I’ve been following the news about Facebook Libra with curiosity.
Since the social media giant’s announcement that its rumored new digital currency was a reality, the internet has exploded with reactions of doom and gloom.
Facebook is going to take over the world! If they create their own digital currency, they can control our lives!
Such soundbites have been the order of the day from the likes of John Harris at The Guardian, as we’re told that Facebook Libra is the last thing the world needs.
Now, I’m not going to claim that it is, or that it isn’t, but the one thing that struck me about the outpouring of condemnation and outright scaremongering in some instances was who was actually telling us that Facebook Libra is “the last thing the world needs.”
Primarily tech and finance commentators from the western world.
Of course, we don’t need Facebook Libra in the western world. As a resident of the United Kingdom, I have access to an overabundance of digital payments systems and apps that make my financial life so much easier.
I can use my phone to pay for my morning coffee; I can quickly trade some Bitcoin via my app while I wait on my coffee being made, and can transfer some of my recent profits straight to my bank, all before I even leave the coffee shop and head for my train.
I could wax lyrical about how Facebook is the epitome of evil, how this new Libra project is bad news, and how it should not be allowed to happen.
All from the comfort of my settee in my nice city center apartment in the UK.
But what if those who are most opinionated about the subject aren’t the target market? What if Facebook isn’t looking to convince me, or John Harris at The Guardian to ditch our already extensive selection of digital payment apps that make our lives so much easier already?
Before I start claiming that the world doesn’t need Facebook Libra, it’s maybe an idea to have a look outside of the bubble that many of us in the western world undoubtedly operate.
The Western Union debate
As a born and bred westerner, I’m one of those people who have certainly heard of Western Union, but who have never had reason to consider using their services.
My guess is that I’m not alone, and I’m not intentionally singling out Western Union, in particular, it’s just that they are probably the most well-known of these finance companies who seem to specialize in dealing with remittance payments and non-western world payments.
There are others of course, such as Ria Financial and MoneyGram, and they all operate in much the same way as Western Union.
One of the more prominent issues with Western Union, in particular, is scams.
Unlike many payment services in the western world, there is no way of reversing or canceling a payment if it goes awry. Once someone walks into a Western Union payment area and claims the cash, it’s gone for good.
Ah, but wait, I hear you say. What about the stipulation that ID must be presented for a payment to be claimed?
Yes, that’s true in many cases, but it’s probably worth bearing in mind that not everywhere has reliable forms of ID available to them. In the western world, we can simply show a drivers license or passport, but in some countries, an official form of ID is quite challenging to come by, and often-times fake ID’s are actually a more accessible option.
Many of these payment companies that specialize in remittance payments operate with a variable exchange rate markup, which users often won’t know until they go to make the payment.
Facebook Libra could make a difference in markets that need it most.
It’s incredibly ironic that many of the most expensive “cost corridors” when it comes to sending remittances involve the poorest people.
Below is a table that shows the highest cost corridors of sending remittances for a few hundred dollars. As you can see, there isn’t much to worry about if you’re based in the west and you’re looking to send money to someone else based in that region.
The same can be said when we look at the most popular payment corridors for remittance payments, with payments from the United States to Mexico leading the way. Not a western to western corridor in sight.
A monopoly under threat?
Western Union has essentially been allowed to control much of the non-western world remittance market for far too long, and regularly adjusts fees between different payment corridors as it sees fit, often without much warning to those who use those services regularly.
Why do they do that? Well, because Western Union is nothing if not proactive in pursuit of profit, and also because it can.
Western Unions markup for sending money from the US to the Philippines was, for a long time, one of the highest provided by the company.
Facebook Libra has the potential to put an end to much of this.
Now, I know what some of you may be thinking. Why swap out one monopoly for another, right? Well, sure, you’re right in that regard, but if Facebook is indeed looking to streamline the payments process that many people in less wealthy parts of the world face, then that surely has to be a good thing, doesn’t it?
There’s sure to be growing pains, and undoubtedly there’ll be issues along the way, not to mention a pretty significant show of resistance from the more traditional financial establishments that have had things their way for far too long.
If the likes of Western Union or Ria Financial Services, or MoneyGram intend to make a fist of this fight and not get swept away in the Facebook tidal wave, then it’s on them to do something that they probably haven’t had to do in quite some time.
Win over their audience.
There’s nothing to say that the likes of Western Union can’t come out of this successfully, but that will involve taking a long, hard look at their current business model, and realizing that the fees and markups that they’ve applied to people in poorer parts of the world who haven’t had much choice in the past have to be addressed.
The people will soon have a choice, and regardless of who eventually wins out, it will hopefully benefit the end user.
Cryptocurrency has long been touted as the great disruptor of stagnant, traditional industries, and finance has always been at the top of that list.
For all the talk of Bitcoin being the true rebel, it looks as though it’s actually one of the largest corporations in the world who are about to make the biggest noise.