Facebook Pay's introduction has been handled better than Libra
Facebook is building two distinct payment projects that are representative of the company's goal of moving into financial services, are quite different and need to be considered separately.
Facebook's Libra is a stablecoin linked to the value of other currencies like the U.S. dollar and the Euro. Following Libra, the company launched Facebook Pay, a payment system “built on existing infrastructure and partnerships” with payments processed by PayPal, Stripe and others.
Libra is positioned as a “simple global currency and financial infrastructure,” as it is a currency that records transactions on a blockchain like other cryptocurrencies. Global by design, Libra is intended to be used anywhere by anyone with internet access.
By contrast, Facebook Pay is similar to PayPal and Venmo, accepting all major credit and debit cards for transactions such as fundraisers, in-game purchases, event tickets, and person-to-person payments on Messenger. Unlike the broad scope of Libra, Facebook Pay transactions are limited to in-app purchases on Facebook and Messenger with availability coming to Instagram and WhatsApp in the future.
Reaction to Facebook’s Libra announcement included a firestorm of regulatory questions and data privacy concerns from financial regulators, lawmakers, as well as data protection and privacy enforcement authorities. Financial regulators expressed concern that potential widespread adoption of the digital currency by the company’s 2.4 billion users could undermine the global financial system and pose a threat to anti-money-laundering efforts. Much of the opposition to Libra from U.S. lawmakers centered around Facebook’s failure to address privacy concerns in the wake of the Cambridge Analytica data leaks.
Concerns about Libra even prompted both Germany and France to block the digital currency. According to Reuters, a joint statement issued by the countries said, “no private entity can claim monetary power, which is inherent to the sovereignty of nations.”
There has been no such firestorm of controversy around Facebook Pay. The company was quick to clarify that Facebook Pay will operate independent of the Libra network and the company’s Calibra cryptocurrency wallet which is expected to be built into Facebook Messenger and WhatsApp.
Facebook has also sought to alleviate concerns about the security of Facebook Pay by highlighting its security features on its website, saying “we designed Facebook Pay to securely store and encrypt your card and bank account numbers, perform anti-fraud monitoring on our systems to detect unauthorized activity and provide notifications for account activity. You can also add a PIN or use your device biometrics, such as touch or face ID recognition, for an extra layer of security when sending money or making a payment. Facebook does not receive or store your device’s biometric information.”
Concerns about Facebook Pay have mostly centered on giving Facebook access to payment information after the company’s recent mismanagement of user data. Data privacy advocates are also weary of the potential for the company to use purchase history in its multibillion dollar ad business.
While Libra and Facebook Pay should be evaluated on their own merits, the public discussion around both indicates that the company has to overcome some challenges to make significant inroads into payments, the major one being public trust. According to Forrester, “consumers don’t trust Facebook for digital payments. Only 5% of US adults say they would trust Facebook to provide digital payment services. That’s well below the likes of Amazon, Apple, Google, and others.”
Even as Libra and Facebook are evaluated separately, it remains to be seen if consumers regain enough trust in Facebook to use their financial products.