Users of popular messaging apps, including WhatsApp and Line, might soon be able to make cross-border payments effortlessly. In a move that will further disrupt the payments industry, the creators of such apps, including Facebook, are working hard to develop their own digital currencies that can be transferred to anyone in a user’s contact list.
The spectacular implosion of bitcoin and its peers over the past 15 months has done little to deter investments of time and money in new digital currencies.
Among the most exciting developments in the crypto space will be the introduction at some point in 2019 of digital coins and tokens created for and aligned with the world’s most popular messaging platforms, including Facebook’s WhatsApp and Messenger, Telegram and Asia-focused LINE, among others.
Imagine for a second the ability to open your WhatsApp contact list, select friends overseas and transfer to them your digital coin—one that is pegged to stable fiat currencies and as such eliminates the wild price swings that holders of bitcoin, ethereum and the like have become accustomed to. Per reports, this is what Facebook are working on. Potentially, they offer a means to avert the largest portion of the foreign exchange cost associated with sending money across borders.
For Facebook, Line, Telegram and other messaging companies entering the world of crypto, there is no issue with coin or token adoption. Whereas bitcoin as an instrument needs to attract and compete for consumers, messaging companies have hundreds of millions of them from the get-go, and billions in some cases.
There is evidence aplenty that payments within messaging apps, overseas or otherwise, will be extremely popular with consumers. Payments within the popular WeChat app, developed by Tencent, have exploded in China in recent years. Take a visit to Shanghai and you’ll quickly notice how infrequently cash is used by locals. Here, everything from taxis to souvenirs and snacks from local markets is paid for with funds from a WeChat (or Alipay) wallet using QR codes.
The same is true in Sweden, where only 13 percent of consumers say they have used cash for a recent purchase. Most Swedes use the popular Swish app, although that was not created for messaging. Both Swish and WeChat allow users to easily transfer money to friends in contact lists, albeit for renminbi and krona only.
There appears little reason why overseas remittances handled by these messaging giants would be any less popular than domestic payments, especially after adding exchange-rate avoiding crypto elements.
One might ask whether any of this has anything to do with blockchain technology. Yes, this is the crypto space after all, but the choice to move towards blockchain is largely a marketing stunt, critics say. “Nothing Facebook is doing in the payments space requires a blockchain,” cryptocurrency expert David Gerard said this week. Fintech groups like TransferWise and Revolut have excellent apps that allow users to send money overseas at extremely cheap rates, without the need for blockchain.
An obvious problem with the current plans of Facebook and its peers is that of regulation. It seems unlikely that such companies can avoid the regulatory hurdles that beset bitcoin in 2018. The decentralized nature of many cryptocurrencies makes them ideal instruments for those involved in illegal activity, which makes regulators suspicious. There are also technological limitations to contend with, the biggest of which is the problem of scalability, which refers to the limited amount of transactions that a cryptocurrency network can process.
Obstacles will surely be overcome, though, and together with payments specialists, messaging giants look likely to further disrupt the payments industry, reducing the costs of international money transfers as they go and benefitting consumers everywhere.
For many currency routes, FX costs have been slashed in recent years by a number of industry-disrupting fintechs, allowing such firms to slice great chunks from the banking sector’s lucrative remittance markets. Banks are fighting back, though, by developing low-cost, digital offerings of their own.
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