We have had a record breaking February in the UK weather-wise. One of the days in Feb saw temperatures go up to 21 degrees Celsius. While the cold has returned a little bit, it seems winter is largely done. I get that sense with cryptos, as large institutions one after another are announcing projects, and it only takes one of them to take off for cryptos to go mainstream.
Messaging applications thinking of launching their own cryptos is nothing new. Telegram and Signal have been at it for sometime. However, it is a bigger deal when Facebook looks at introducing cryptocurrency based payments on Whatsapp. The size of the opportunity for Facebook and their partners when the platform is Finteched will undoubtedly get them out of their issues they have faced over the past 24 months.
Facebook has two problems to solve, and both potentially powered by Blockchain.
Facebook’s Blockchain team has been spearheaded by former PayPal president David Marcus since last May. In order to replicate Tencent’s successes, they need to leverage the user base of their apps (FB, Whatsapp, Instagram). Bringing payments to Whatsapp would have have been a good starting point, however Facebook’s attempt at doing that in India (the largest Whatsapp) hasn’t gone too well.
About 1 Billion people in India have a mobile, and about 300 Million of them use Whatsapp. Last year, Whatsapp pay launched in a controlled fashion to 1 Million users in India. They used the government backed UPI (Unified Payments Interface), and during the pilot, they achieved about a Million transactions per month. However, the regulators weren’t happy that the payments engine was on Facebook servers. They wanted the servers to be in India, and despite several conversations there is no solution.
The payments market in India is a $1 Trillion market by 2023, and it would be a shame if they missed the bus.
Facebook is looking to create a stablecoin attached to a basket of currencies. There is a team of about 50 people working on this project. If FB planned to use the Indian market as a testing ground for the crypto-powered Whatsapp pay, they may now have to deal with the crypto currency regulatory ban too. However, if they managed to clear the regulatory hurdle, their growth could dwarf the likes of PayTM, and that would just be the start. On top of it, Indian remittance market boomed to $80 Billion last year. If I could use whatsapp to send money to my mom, that would be awesome!!
The other issue that FB has had is around data privacy. With identity management being one of the key concerns, FB saw record number of millennials leave their platform last year. However, with a Blockchain powered Self Sovereign Identity engine, Facebook connect could redefine it’s position with data privacy as a distributed identity management platform.
How decentralised it (the identity engine) will stay if launched is another challenge. Most federated and decentralised identity management engines have ended up creating a centralised monopoly in the past. With Blockchain behind the scenes, one would expect that to be different.
Will Facebook replicate Tencent inspired successes through Whatsapp? Will FB change perceptions through a genuinely decentralised identity engine? Would 2019 be the year of mainstream adoption of cryptos? Watch this space.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
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