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'Payments shouldn’t be a hurdle we fall at,' says Facebook
Is Facebook's move to take on the global financial system with the launch of Libra, a tipping point for cryptocurrency travel payments? Pamela Whitby reports
“Payment details shouldn’t be a hurdle we fall at,” said Facebook’s Neasa Bannon, Head of Travel Marketing, EMEA, at the EyeforTravel Digital Summit in May. Whether she knew about the imminent launch of the Libra, Facebook’s global digital currency which launched this month, or not, her words have since taken on new meaning.
Driven from the top and steered by David Marcus, the former Paypal president, the Libra project is Facebook’s bid to take on the global financial system and is further confirmation that 2019 is the year of payments. Backed, it says, by hard assets to give the currency stability, Libra has already secured support from 28 founding members, among those big names like Visa and Mastercard, as well as travel tech companies Booking Holdings, Uber and Lyft.
At the EyeforTravel summit, Bannon was talking about eliminating friction in the customer experience, and she said one of the biggest challenges for business was, unsurprisingly, the payment process. In fact, Facebook research shows that 55% of users will abandon a purchase if it is too difficult, never mind the fact that the average website today requires 22 clicks to purchase. “That is too much, it is not necessary and there are smarter ways to capture data points,” she said.
With Facebook able to take payments, it will have more purchase data to better target users and advertisers alike
With Libra, Facebook's digital coin and Calibra, its digital wallet due to go live in 2020, Facebook is effectively launching a new payment system, and a much smarter way to capture data points. Like all companies, the social network is looking for ways to drive fresh profits, and the online travel industry, predicted to be worth $818 billion by 2020, is a huge opportunity. On Instagram, according to Bannon, travel has become the number one search category, and Facebook’s business website states that “67% of leisure travellers across Europe, Middle East and Africa use Facebook for travel-related purposes.” If Facebook is able to take payments, it will have more purchase data to better target users and advertisers alike, potentially delivering a better ROI for travel ad spend. Social media ad budgets are, after all, on the rise and expected, according to the 2017 CMO survey, to almost double by 2023.
A complex business
Payments are complex and Facebook’s new system could help to solve some of the issues that travel companies are facing today. For example, one national carrier recently told EyeforTravel that it was taking its Facebook chatbot out of action, for the moment, because the airline’s current payment technology provider does not support PSD2, the EU directive, which comes into force in September.
One of the objectives of the directive was, according to the Financial Conduct Authority, to ‘promote the development and use of innovative online and mobile payments’. Facebook is committed to mobile, unsurprisingly; as Bannon explained in May, the research shows that 60% of its users today want to book and check in on a mobile. Rolling out the Calibri digital wallet across all Facebook properties will be a priority, although Messenger and WhatsApp will be first in line.
From the travel industry, among the official comments on the Libra Project have come from a Booking Holdings spokesperson Leslie Cafferty, who is quoted by Skift saying: “Financial inclusion and economic empowerment are complex issues, but this is a great initiative, bringing together a lot of trusted global companies to help solve a global need.”
From the ride-hailing companies, which are witnessing significant growth in emerging markets, and are likely attracted by claims that Libra will empower 1.7 billion unbanked people, Uber Technologies’ official line comes from Peter Hazlehurst, Head of Payments and Risk. “Libra has the potential to bridge the gap between traditional financial networks and new digital currency technology, while reducing the costs for everyone – especially consumers,” he said. However, on the issue of the unbanked and social benefits, the Financial Times delivers a scathing analysis of why this might be less than convincing.
Facebook will become much more powerful by controlling not just the minds of its citizens, but also their finances
Maksim Ismaylov, CEO, Winding Tree
Maksim Ismaylov, CEO and one of the founders of Winding Tree, which is building open source, decentralised solutions for the travel industry, is also not convinced. “Facebook simply wants to become a global bank, which I'm sure they will succeed in doing. Facebook will become much more powerful by controlling not just the minds of its citizens, but also their finances. But remember, Bitcoin - the first blockchain - was created to prevent this kind of centralisation of power, because it's incredibly dangerous. How ironic is it that now we have ‘cryptocurrencies’ produced by banks like JP Morgan and now Facebook?"
For Winding Tree, a strong advocate of public blockchains which, “by their nature have to be open, neutral, borderless and censorship resistant, as it stands, the Libra project is neither a cryptocurrency nor a blockchain project.
Winding Tree’s take on Libra can be summed up by this image from Cryptomaniak, a learning platform for newcomers and beginners
Exciting opportunity – for some
For every naysayer, and there are plenty, there are others that see the Libra project as an exciting move. Joerg Esser, a Roland Berger partner who spent 10 years at Thomas Cook, and has recently been involved in producing a 5 Step approach to building a blockchain, is one. “It’s an exciting topic for sure because so far it has primarily been about ‘currency’, and we have been left to guessing what the applications could be and who would possibly buy in. Now, it’s about specific use cases.”
One way or another, it will be possible to earn or collect Libra-coins on Facebook and then pay for services by booking, for example, Lyft.
“Facebook’s significant user base and the serious stakeholders it has accumulated, make it a compelling proposition. My view is that finding tangible use cases, at scale, has very often marked the tipping point for new technologies/capabilities, and this could be it for virtual currencies,” Esser says.
Finding tangible use cases, at scale, has very often marked the tipping point for new technologies/capabilities, and this could be it for virtual currencies
Although Bobby Healy, CTO of tech firm CarTrawler, which represents over 100 airlines, is not a big fan of Facebook, from a consumer point of view it could be positive. “I like anything that disrupts and improves payments. Banks slow Internet commerce down so much,” he says. However, it may not be so great for smaller OTAs which should be worried about being excluded. As a huge advertising platform, Facebook has a "special relationship” with Booking Holdings and asks Healy, “who will regulate or police that?”
In the world of payments, trust and transparency are two essentials, and on this score Facebook still has work to do following the Cambridge Analytica scandal. Already, there is growing opposition from data and privacy activists, regulators and banks, as well as calls for an anti-trust investigation, and so it is very unlikely to be a smooth journey.
More from Neasa Bannon’s presentation on some of the ways travel brands are using Facebook in the coming weeks. If you missed the London Summit, join us later in the year at EyeforTravel Amsterdam (Nov 26-27) or EyeforTravel North America (Oct 28-29)