Facebook’s Cryptocurrency Project Could Change the eCommerce Landscape
After a year of almost no news at all on Facebook’s secretive Blockchain division, and if or how The Social Network might be planning to utilize the digital currency exchange process, we’re now starting to get some leaks and notes. And if the reports prove accurate, it could be one of the most significant shifts for company, and could sway the trajectory of eCommerce more broadly.
Back in March, The New York Times reported that Facebook would soon be seeking to launch its own cryptocurrency offering, which would enable users of Facebook’s apps to easily exchange money between friends, without additional fees. Seemingly, the main focus for this option would be the Indian market – India sees the highest amount of funds sent between family members via remittance, which the proposed process would facilitate.
Facebook would obviously love to expand its presence in India, the world’s second most populous nation, while starting with these types of payments would give Facebook the grounding to expand the same to other funds transfers, housed within Facebook itself, enabling simplified international currency exchange.
Now reports have suggested that Facebook may actually be looking even bigger than that. According to The Wall Street Journal, the company is now working on its own, cryptocurrency-based payment network which would theoretically be able to compete directly with conventional credit cards.
As per WSJ:
“Facebook Inc. is recruiting dozens of financial firms and online merchants to help launch a cryptocurrency-based payments system on the back of its gigantic social network. The effort, should it succeed, threatens to upend the traditional, lucrative plumbing of e-commerce and would likely be the most mainstream application yet of cryptocurrency.”
The effort, according to the WSJ report, looks set to be a “stablecoin” offering, a cryptocurrency which has its value is linked to conventional currency markets. That would likely be why Facebook needs the backing of financial firms, to insure it against fluctuations in bitcoin markets, which can significantly impact vaues at any given time.
In this, Facebook wouldn’t only be looking to facilitate basic fund transfers, but it would essentially be positioning its payment network as a direct rival to Visa and MasterCard. That would enable Facebook to reduce the fees and charges associated with traditional funds transfers, while also facilitating direct, international payments on its network, utilizing only your existing Facebook credentials for the same.
And that process could have benefits even beyond Facebook itself – as noted by Ars Technica:
“One of Facebook’s big strategic advantages is the fact that a fair number of websites already use Facebook APIs to allow users to log in using their Facebook credentials. It could be a straightforward matter to extend that existing infrastructure to allow users to make purchases on third-party websites using their Facebook credentials.”
So, essentially, users would be able to earn “FaceCoins” (or “ZuckerBucks”) and have them accumulate on their Facebook profile for use in transactions on the network. Presumably, the use of such coins would extend to Instagram, WhatsApp and Messenger, and users would be able to transfer funds into their FaceCoin account, giving them an enclosed Facebook wallet of sorts to facilitate the same.
That may not sound revolutionary, but facilitating online payments is a complex process, particularly across borders. If Facebook is able to do so, while also reducing the costs associated with the same, that will be a huge win, and you can bet that Facebook users would love a one-click shopping process available for all products and services listed within Facebook’s various apps, and on partner sites.
But there is also another interesting wrinkle to this:
“Facebook’s also considering paying users fractions of a coin to watch adverts, engage with other content, or shop on its platform.”
There’s very limited detail available on this, but through the same process, Facebook may also be able to incentivize in-app activity. Various apps use the same – in Pokemon Go, for example, you can earn a small amount of tokens for in-app purchases by playing the game. The amount you can earn through this is capped, but it encourages further spend by giving you a little bit to go towards your store purchases – when you’re close to having enough accumulated for what you want, and you only need an extra $1, why not spend a little to get there?
Does that approach work? Pokemon Go, which is well past its peak hype period, generated $795 million in revenue in 2018, a 35% increase over the previous year. It’s fair to assume that linking in-app activity to purchase incentives has played some part in that rise.
It’ll be interesting to see how Facebook might look to actually implement this, and what it looks to incentivize – and then, how scammers try to cheat the system – but overall, this is a hugely interesting project from The Social Network, and one which, as noted, could prompt a major shift for the platform, and eCommerce overall.
Definitely an element to watch in the coming months.
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