Facebook has just announced details of its much-anticipated cryptocurrency project Libra. While it is expected to find many use cases across financial services, it might also impact e-commerce in a big way.
Social media giant Facebook has just unveiled details of its cryptocurrency project named Libra. The company has released the white paper
along with a testnet (test blockchain network for the project). The much-anticipated cryptocurrency will be available in the first half of 2020 and will be accessible across the company’s popular platforms such as WhatsApp and Messenger.
Interestingly, Facebook is working with many big companies as part of its Libra Association. These include the likes of Visa, Uber, PayPal, Stripe, Lyft, eBay, Spotify and Booking.com, among others. In Mark Zuckerberg’s announcement post
, he mentioned that he expects these companies to build their own services using Libra.
Facebook Libra and E-Commerce – Made for each other?
While its stated goal is financial inclusion and serving the unbanked, Libra has the potential to propel Facebook as an e-commerce powerhouse. Users have been utilising the platform to market and sell their products and services for a long time, but Libra might just accelerate Facebook’s push into the e-commerce space by controlling an important part of the industry – payments.
Facebook can use Libra to promote frictionless payments within its entire ecosystem and promote use by incentivising both users and brands on the platform. If Facebook’s cryptocurrency gains traction, the company will be in a position to control the end-to-end e-commerce lifecycle – from being a digital marketplace to payments and settlements – without going through an intermediary like banks or payment services like PayPal. This can potentially disrupt e-commerce, banking and other technology players.
The cryptocurrency is backed by less volatile financial assets which will keep its value stable, making it ideal for e-commerce payments. Facebook has also built a Calibra Wallet that can hold the cryptocurrency which is expected to be integrated with WhatsApp and Messenger. It may also be integrated with Instagram, in addition to Libra’s obvious integration with partners of the Libra Association. This can potentially transform Libra into a ubiquitous payments system which works across the most commonly used digital platforms. The low transaction fee model, unlike credit cards, only makes it more attractive to businesses and users.
If Libra can indeed enable a vibrant e-commerce marketplace, it will also benefit Facebook by becoming attractive to advertisers. By keeping users on Facebook throughout their e-commerce journey, it will potentially increase the value of Facebook Ads. E-commerce combined with ad revenue will definitely excite Wall Street, and early indicators are that the market has already given a thumbs up to this news
And then there are subscriptions, of course. With tech giants Amazon
increasingly focusing on subscriptions, it is natural that Facebook will use Libra to step up its subscriptions game. One of the great advantages of cryptocurrencies is their suitability for micro-transactions worth a few cents, unlike credit cards and traditional payment services. Facebook has been dabbling with news subscriptions
on its platform, and it could possibly use Libra to offer micro-subscriptions such as access to a single article or a specific time period, as well as full-scale subscriptions.
Its partners in the Libra Association include subscription giants such as Spotify, which may use the cryptocurrency to better reach its addressable market and enable seamless payments at scale. In fact, Spotify is already seeing Libra as an easily accessible payment system
in the financially underserved markets.
Facebook’s relationship with 7 million advertisers and 90 million small businesses
, along with a penchant for crafting seamless user experiences and building scalable products, makes Libra a potential powerhouse for e-commerce. If Facebook can address concerns around privacy
and centralisation, this may just become one of the most important milestones in the evolution of the company.