I was at a bar with some friends recently, and, since we're nerds, our conversation turned to Libra, Facebook's proposed digital currency. Some were adamant that it will be a safer bet than Bitcoin. And, since Libra is backed by Mastercard, Visa, and PayPal, they said this blockchain-powered currency would be easier to use.
I told them I didn't agree, because Libra isn't simply digital currency. Facebook and its 20-plus partners are building a payment platform to integrate with our daily lives. Soon, I said, I expected its authentication to be biometric--we'd have our faces scanned rather than sign our names. And what matters isn't currency but data. A payment platform that connects purchases with locations, behaviors, relationships, employment, dining habits, and favorite memes? Libra could wield extraordinary predictive powers about its every customer.
This, to me, sounds uncomfortably like China. There, from January to October 2018, mobile payment transactions reached a whopping $12.8 trillion. Chinese citizens are even giving e-hongbao--digital versions of the traditional cash-filled red envelopes given as gifts. China's top payment platforms are WeChat Pay and Alipay. WeChat Pay is operated by Tencent, the enormous gaming, social-media, and e-sports empire, while Alipay is part of Alibaba. Both continually invent new ways to pay for things. You can already pay using your face in China--smart cameras and kiosks use facial recognition technology to identify and authenticate people, even if they've just grown a beard, bought new glasses, or lopped six inches off their hair. (When consumers complained about stores' lighting or camera angles making them look puffy, Alipay rolled out beauty filters.)
China doesn't value digital privacy as we do in the U.S., which is one reason it has leapfrogged much of the world in digital payments. Another is its vast size: Its 1.4 billion people purchasing things digitally creates an enormous data set that can be mined--so Tencent and Alibaba can, among other things, continually deepen e-commerce analytics and make their systems better. In the U.S., when we tap phones and smart watches against payment terminals to activate Apple Pay, Samsung Pay, or Google, the digital wallet often doesn't register or returns an error message. The number of payment companies out there means there's a constellation of different systems and terminals. (Even our physical credit cards don't work consistently. Many come with a chip and a magnetic strip; it's up to individual merchants to activate both systems.)
A Libra-fied cryptocurrency ecosystem could simplify payments for everyone, since Facebook seeks to make financial transactions as frictionless as sending texts or sharing photos. This could help the estimated 1.7 billion unbanked people in the world participate in everyday commerce: New users would simply upload a government-issued ID to set up a digital wallet to gain access to the Libra currency. This wallet--Calibra--will be integrated into Facebook-owned Messenger and WhatsApp.
More than two dozen companies, including Spotify and Uber, are already on board with Libra. But regardless of how many dazzling partners Libra secures, success will hinge on how transparent Facebook will be about how data is used and shared, given Facebook's history of mismanaging its users' private information. How will consumers know if their private purchasing details are being kept private? Will business owners gain access to insights gleaned from all the data generated? And what should entrepreneurs disclose to their customers?
The benefits to business owners in a Libra-fied world would be tremendous: payment systems that work seamlessly within Facebook; digital dashboards that offer real-time customer support and insights; hundreds of millions of new customers. But I wonder whether customer data will be locked away in Facebook's digital wallet system, and whether Facebook will grab and keep businesses' valuable customer data. As Libra's platform grows, that data could be shared, potentially with competitors. Which means both customers and businesses could end up paying their tabs with dollars and personal data.