Blockchain/Bitcoin

Facebook Got Data Privacy Wrong, but Could it Get Blockchain and Fintech Right?

It is becoming more apparent that the financial services industry is being reshaped by bigtechs, or the big technology players such as Google, Apple, Facebook, Amazon and Alibaba, which are leveraging data and consumer insights to offer a unique, personalized user experience to fully engage consumers, putting increasing pressure on traditional financial institutions.

Facebook in particular have been seen doubling down on fintech and blockchain of late.

Facebook Jumps into the Blockchain and Crypto Bandwagon

Image Credit: Flickr | Thought Catalog

One area in particular where Facebook has increasingly been focusing on is blockchain and cryptocurrencies. The firm recently hired a team of researchers from London blockchain startup Chainspace in a so-called “acqui-hire.” According to its website, Chainspace is involved in developing blockchain technology that facilitates smart contracts.

The news came less than a year after Facebook hired David Marcus, the former head of its Messenger team and former president of PayPal, to explore how the company could use blockchain technology.

“Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology,” a Facebook spokesperson said earlier this month. “This new small team is exploring many different applications. We don’t have anything further to share.”

In late 2018, news broke that Facebook was working on a stablecoin, a cryptocurrency pegged to a fiat currency, for global payments on its WhatsApp messaging app initially focused on the Indian market.

Analysts have posited where Facebook could go with a dollar-based cryptocurrency, mentioning peer-to-peer payments, a “Pay with FB” option for online vendors, and also seamless payments for offline merchants via QR code scan.

They also noted that especially for emerging countries like India where mobile phone prevails, a Facebook dollar pegged stablecoin and digital wallet could represent both a universal mobile commerce system as well as a more stable store of value than their local fiat currency.

Facebook is just one of the bigtechs exploring how it could use blockchain technology. Amazon, Google and Microsoft all have recently launched some projects involving blockchain. Apple filed a patent in 2017 that hinted at its interest in distributed ledgers.

What is Facebook’s Fintech Gameplan?

Image Credit: Though Catalogue| Flickr.

Facebook announced its payments feature in March 2015 which allows users to send and receive money over its Messenger messaging app. The social networking giant began expanding its financial services business overseas in 2016 when it registered Facebook Payments International Limited in Ireland, then Spain.

WhatsApp, India’s most popular messaging app with more than 200 million active daily users, began testing peer-to-peer transactions in India in early 2018.

A report published in August 2018 by the Wall Street Journal (WSJ), unveiled that the firm has been delving deeper into the financial services business, now attempting to persuade banks in the US to share detailed financial information about their customers including card transactions, shopping habits, and checking account balances.

The idea is to have more banks offer services through Facebook’s messaging platform Messenger, sources told the WSJ.

Several financial institutions have already integrated with Messenger including American Express, Mastercard, MoneyGram, and PayPal. Brazil’s Banco Bradesco for instance is leveraging the Facebook platform to allow customers to conduct day-to-day banking from Facebook, relying on the social network’s customer data analytics to target users.

As Facebook becomes more intertwined with every aspect of our lives bring about more convenience in a singular platform, it is natural for some one to be concerned about Facebook’s ability to protect the vast amount of data that users will be entrusting to the platform.

Facebook has demonstrated in the past that we can cannot completely trust them to safeguard our data, in light of that — can we trust them to handle our payments and our cryptocurrencies?

Featured image credit: Wikimedia Commons