Can WhatsApp coin fix Facebook's payments trajectory?

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Facebook’s payments ambitions have made banks wary for years, despite many false starts. But now it looks as if Facebook is pivoting to develop a remittance business, starting with a cryptocurrency project in India.

Through a blockchain development unit created this year — led by former PayPal president David Marcus — Facebook has been at work for months creating a way for users of its WhatsApp messaging app in India to make small-value transfers using a stablecoin, which is a type of cryptocurrency pegged to the U.S. dollar, according to Bloomberg.

This isn't Facebook's first foray into virtual currency. The social network launched its own coin, called Facebook Credits, in 2010 with the goal of creating a common currency for in-app purchases on its platform. The idea was to eliminate the need to convert currencies for global users, but developers preferred to set their prices by region, so Facebook phased out its virtual currency in 2013.

Facebook's relationship with mainstream cryptocurrencies has been more combative. At the start of 2018, Facebook began blocking ads for cryptocurrencies, but loosened that ban in June. The social network was still wary of ads for risky financial products such as initial coin offerings, so it maintained some restrictions.

Leveraging cryptocurrency for P2P in an emerging market could give Facebook momentum at a time it needs to find new growth, as younger audiences in developed markets have failed to join the 2.25 billion consumers currently using Facebook worldwide.

In developed markets, Facebook’s disclosures in recent months of a major data breach and dubious data-sharing practices are raising further questions about its role and its growth trajectory.

“People happily shared all their personal data with Facebook for years, but it’s a trillion-dollar ad platform, and learning what Facebook did with their data is making some users uncomfortable,” said Adam Levin, co-founder of Levin previously was a director of the New Jersey Division of Consumer Affairs.

Some high-profile tech industry observers recently disconnected from Facebook, and millions of consumers are migrating to Instagram, Levin noted. The fact that Facebook owns Instagram underscores the lack of alternatives to the prominent social network.

Facebook's reputation has suffered from the negative headlines, according to eMarketer, but the company's payments operations have avoided the glare. In the U.S. Facebook continues to support P2P payments via Facebook Messenger, and with many users' payment cards linked to their Facebook account for making purchases and donations, there have been no reports of card data exposure.

Observers say Facebook has been working to recalibrate its strategy in the wake of the recent revelations.

“When Facebook gets past its current PR challenges, it’s in an enviable position to extend users new offerings linked to commercial services that payments will facilitate,” said Richard Crone, a principal with Crone Consulting LLC.

Studies show that after the initial shock waves following a data breach, most consumers return to business as usual. The effect on Facebook from its recent data and privacy gaffes will be no different, Crone predicts.

“Businesses don’t have any better way than Facebook to connect with customers for word of mouth campaigns, and users that already rely heavily on Facebook as a repository of their own personal, travel and commercial history aren’t going to walk away from that convenience so easily,” Crone said.

Facebook would be wise to reassure consumers of the platform’s trustworthiness and find ways to encourage users to keep visiting the platform to drive commerce, he said.

The overwhelming majority of U.S. Fortune 500 businesses have a public-facing presence on the country’s largest social media platforms, and that number is still climbing, according to eMarketer.

It would take a formidable new competitor to derail Facebook, said Shane Green, CEO of, a U.K.-based company developing user-centric data solutions. Consumers use to aggregate their own data from over 15,000 sources and access it with financial, health and lifestyle apps.

Emerging Internet search firms like Duck Duck Go and Brave may succeed by capitalizing on consumer demand for better privacy and data-protection, Green noted.

“Duck Duck Go has been growing like crazy without tracking individuals like Google does, and I see them introducing more interesting features soon to help use data provided privately by individuals to personalize search results,” Green said, noting these firms have no hope of directly challenging Google.

Facebook lost 1 million users in Europe this year was due to new privacy regulations. In North America, daily active users have remained steady at 185 million, the company said in October.

“Facebook has no clear emerging challenger, but I can’t imagine Facebook continuing to dominate as it has for much longer, as it’s lost its appeal with younger people,” Green said.

What could chip away at Facebook — along with disinterest from younger audiences — is the rise of new, more localized social media networks.

One example is Nextdoor, a neighborhood-focused app launched in 2011, which is rapidly expanding under Sarah Friar, the former CFO at Square who was named NextDoor's CEO in October 2018.

Though NextDoor doesn't disclose its total users, it claims to reach more than 200,000 neighborhoods and recently expanded within Europe. The app is now available in the U.S., U.K., Germany, France, Spain, Italy, and the Netherlands.

NextDoor enables neighbors to connect for socializing or information and many businesses are using the app to promote products and services.

"For any social media app to work it has to give consumers something to keep them engaged, and if shopping and commerce are part of that, payments will need to have a role," Crone said.

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Cryptocurrencies Online payments P-to-P payments Facebook India