When I heard the news that Facebook was proposing to launch a digital currency called the Libra in 2020, the alarm bells started ringing at quite some volume.
It’s fair to say that Facebook has a shaky reputation when it comes to customer privacy, as demonstrated by the furore over Cambridge Analytica and the subsequent $5bn payout to the Federal Trade Commission.
We are familiar with banks being hit with a fine when they hide offshore accounts from the taxman or trade in places where they shouldn’t, but generally speaking they look after customer data. Indeed governments usually complain that banks keep too much data to themselves. In the world of social media, this massive fine seems to be accepted as a cost of doing business for Facebook.
Facebook clearly anticipated this negative reaction, so Libra will not be a Facebook Coin. Instead, it will be operated by the Libra Association, which will be based in Switzerland.
The plan is for the Libra Association to have 100 member companies, including a Facebook-operated division called Calibra, Mastercard, PayPal, Spotify, Stripe, Uber and Visa. We understand each of these partners will pay $10m to operate a node within Libra.
And while it may be true that the Libra Association is an independent, not-for-profit organisation, it is also crystal clear that the members are very keen on profit.
It is worth noting that Libra will not be a digital coin along the lines of Bitcoin but will instead have a value based on a basket of currencies. This should reduce volatility and suggests Libra’s customers will be able to make international payments and transfers without the sweat of thinking about foreign exchange rates.
Facebook says it will make money from a ‘negligible’ fee on each Libra transaction that is made via the Facebook app. That sounds like a recipe for success as Facebook has 2.41 billion monthly active users. However, I see little reason why I would ever want to use Libra.
While I may sound like a Luddite, it so happens that I recently came across a cashless payment system that did make perfect sense to me. During the summer, my teenage kids were at a festival where they were unable to pay for food and drink using cash, card or phone. Instead, they were obliged to use something called PlayPass.
PlayPass is a radio-frequency identification (RFID) wristband that is topped up from your bank account, somewhat like an Oyster card. The upside is that festivalgoers don’t have to worry about losing their money or having their valuables stolen from their tent. You could achieve a similar function with a mobile phone payment system, except networks near festivals are usually awful and the battery in an RFID bracelet won’t go flat.
The only downside I can see is the small degree of hassle involved in creating an account and transfering funds. If you have any credit left at the end of the festival, you can cash out – though you will get stung with a £1 charge.
I am happy to embrace new payment systems that work well and solutions such as contactless cards for small purchases are a good idea. However, Facebook’s plans for Libra seem to be based on the WeChat model of ‘One App To Rule Them All’ whereas my preference is to separate my bank, phone, email, ride sharing and TV providers so I at least appear to have a degree of privacy. Please indulge me in that particular fantasy and don’t burst my bubble.
About the author
Leo Waldock, freelance IT writer
