Facebook is a company in need of good news. With a dismal earnings report, their stock dropped 20% in a single day, hemorrhaging over $120 billion. This comes on top of a huge PR campaign in an attempt to earn back public trust after admitting to helping, and profiting from, Russian influence in the 2016 United States presidential election. Though they purged themselves of partner Cambridge Analytica, and openly apologized, cynicism towards Mark Zuckerberg and his social network has never been higher. Which makes his apparent move into consumer finance even bolder.
There are three recent news items helping fuel Facebook’s interests in banking, each bringing about some clarity in what they intend to bring to market.
Facebook Wants Your Banking Data
The Verge reports on Facebook’s recent talks with commercial banking giants like Citigroup, Wells Fargo, and JP Morgan Chase. Their conversations appear to focus on using Facebook’s messenger to interact with consumer banking data, such as account balances and fraud alerts.
This is not unusual. Google, Amazon, and likely Apple are also in talks with the banks centering on the same idea, mostly centered around desired interaction with their voice assistant technology; Hey Google, Alexa, and Siri, respectively, this makes more sense. Asking “Siri, what’s my checking account balance?”, while driving, is a much more logical use case than having that information on request from Facebook Messenger, especially when you already have that ability through text message and banking mobile apps.
The Verge article implies the talks aren’t going well. Banking is obviously one of the top industries concerned with data privacy, so handing the keys over to a company synonymous with selling personal data is not high on their list of good ideas. Not that banks don’t have their own data sales activities, but perception matters. And you know your brand is in crisis when even Wells Fargo won’t subject their customers to your service.
I’d also imagine there is some suspicion as to Facebook’s end goal in banking. Considering the team communicating with the bank is lead by the former president of PayPal, I’d say the banks are right to have some fair skepticism about Facebook’s true intentions.
David Marcus Steps Down from Coinbase’s Board
Having just joined the Coinbase board back in December, Facebook Vice-President, and former President of PayPal, David Marcus cited his new assignments at Facebook, and the desire to avoid the ‘appearance of conflict of interest” as the reason for his departure.
His new assignment is lead on Facebook’s new blockchain initiatives. Marcus, along with obviously having a strong grasp in online money transferring, has been outspoken in his support for Facebook entering the blockchain space, but didn’t promote the idea of using Facebook’s Messenger app for the transfer of cryptocurrency between users.
I can’t imagine Coinbase management feeling too good about this. On one hand, Marcus was likely instrumental in allowing Coinbase’s return to advertising on Facebook, while their competitors are still mostly barred. But on the other, it would seem Facebook may be making moves to offer Coinbase-style services to the largest social network on earth.
Coinbase has seen phenomenal growth, with a current valuation of $8 billion, and growing. They are the AOL of the crypto world. But we know how that story ended.
Facebook Meets with Stellar (XLM)
If Facebook wants to get into the cryptocurrency and banking space, they need to solve an issue; the reconciliation of different cryptocurrencies. If I were to send $100 in ETH to someone through Facebook Messenger, and they wish to have it in BTC, or directly in USD, deposited into their account, how does that happen? And, would Facebook be trying to use their own token to facilitate this? This is where technology like Ripple (XRP), or even better, Stellar (XLM) would come into play.
According to a recent article by Business Insider, Facebook has begun talks with Stellar. This information has helped propel the price of Stellar’s own cryptocurrency Lumens (XLM), in an otherwise down crypto market, and comes close on the heels of the news of their IBM partnership. Business Insider continues on to say:
“In recent months, Facebook’s blockchain team, led by former PayPal executive David Marcus, has met with open source payments technology company Stellar about some of those opportunities, people familiar with the talks told Business Insider. While the talks were early stage, they could shed light onto Facebook’s ambitions to push into finance and take on big banks.”
Did you catch that, “take on big banks” part? This could be part of the reason the “big banks” aren’t in a hurry to share customer data with Facebook, or their notoriously untrustworthy CEO.
Business Insider claims they talked to a Stellar Insider who told them Facebook’s interest lays in using the distributed ledger of blockchain to take on the banks core money movement system, SWIFT. The Stellar insider went on to say:
“They’d be taking the rug out from under the banks… They can add a bank more quickly than a bank could build a social network.”
What’s Facebook Up To?
There’s plenty of public information pointing to the idea Facebook wants their own bank, or at least their own consumer interface with banking. They are heading big into blockchain, a technology that in itself could disrupt Facebook’s core business with a user-friendly decentralized social network, one not requiring the level of ads or privacy invasion of Facebook, with the former President of PayPal at the helm.
Facebook is facing future troubles. They’re commitment to serving less invasive ads, and not selling customers data to firms helping Putin take over the world, is going to leave them with current and future earnings issues. Their investments into AI and VR are interesting, but not what keeps the light on in Menlo Park.
Coinbase is one of the fastest growing and excitingly disruptive companies in the Valley. There is no doubt the market is likely to explode, and Coinbase is going to be facing competition from not only investment banks, but tech giants as well. Banking is an interesting idea for Facebook to generate cash, and a future, especially when they throw in blockchain and crypto tech like Stellar. But is a company so known for dishonesty and privacy invasion the right fit? Will customers who are slowly starting to not trust them with pictures of their cats, trust them with their money and personal financial data?
I don’t know about the future of Facebook, but the clear winner in this is cryptocurrency. It’s impossible for anyone paying attention to not see blockchain and crypto having a huge future.