Facebook Plans Crypto-Currency
Facebook is planning to launch a new crypto currency for users to buy goods online. Over the last year it has been recruiting banks, payment companies and merchants to accept and facilitate the new Facebook coin. The new crypto-currency would facilitate private payment transactions on Facebook platforms and potentially allow Facebook users to earn crypto-currency as a reward for viewing ads.
Facebook’s latest pivot from being an advertising platform to a payments/commerce platform will be difficult to achieve. Even with over 1.5 billion daily users, scale alone is not a recipe for success in payments. Larger companies, like Apple, have found limited success in payments as a result of the sophisticated competition from incumbents like MasterCard, First Data and FIS. These companies are among the most innovative companies in the world, but their ability to provide security, reliability and trust at very large scale are often underappreciated. Facebook realizes the challenges and has adopted a partnering approach rather than “go it alone”.
However, Facebook’s biggest challenge may be that it lacks the consumer trust so crucial to any payments system. Facebook’s limited security capabilities and spotty fraud detection track record make it a rich target for on-line hackers and criminals. A recent Krebs On Security analysis led to the takedown of 74 cybercrime groups operating openly on Facebook with more than 385,000 members. At this early stage, it may be that Facebook crypto-coin is a solution searching for a consumer problem that does not exist.
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