Facebook has been adding to their blockchain team for quite some time now, and the lack of comment from the company has led many to conclude that the social network is preparing for entry to the crypto space as well.
According to reports from Bloomberg, Facebook could soon be implementing a similar feature to what China’s WeChat app has – cryptocurrency payments with their own asset. Reports from CNBC suggest that Facebook may have a much more difficult time than they anticipate.
CNBC states that the social network is working to release the Facebook Coin, a digital currency from Facebook that would be pegged to the dollar. The main purpose would be to transfer money through WhatsApp. The main goal appears to be focusing on the India remittance market, but that could be an indication that they will be increasing their work on this payment option, effectively creating $19 billion in revenue.
In 2014, Facebook acquired WhatsApp, which is considered to be the largest acquisition that the platform has ever had. Since the acquisition, the messaging and several social features have been the main focus, helping WhatsApp to grow to 1.5 billion users each month.
The path of messaging has been much different in China. China has the WeChat app, hosting over 1 billion users and owned by Tencent, but it is not exclusive to messaging. Along with the ability to communicate, some analysts call it a “super-app” due to the ability to do everything from making mobile payments, book travel arrangements, and play games, but without closing out the app.
WeChat Pay has proven to be one of the most popular features that WeChat offers, considering that users have the option of shopping either online or in stores without having to take out their credit card.
When purchasing in the store, the user just has to switch their display to reveal a QR code, which can be scanned at the register. It looks like Facebook is trying to do something similar, as Barclays stated on Monday. However, it will prove to be a difficult endeavor.
Barclays analyst Ross Sandler wrote in an article on Monday that the reason that the WeChat app has had so much success with Tencent is due to “structural differences” in the way that the messaging and payments platform emerged in China, which involved “level-one access to investee companies” from Tencent.
Since WhatsApp is not set up in any similar way, the same service is not likely to come to fruition, says Sandler.
Facebook has not responded to the inquiries from CNBC regarding if they aim to replicate WeChat or its functions. The only information provided is that Facebook is “exploring ways to leverage” blockchain with their small team and that they don’t have “anything further to share.”
Even if Facebook manages to monetize the app in some way, reaching the span that WeChat has done will likely be impeded by the foundation it is built upon.
Considering the privacy scandals that Facebook has dealt with so recently, earning the trust of the public will end up being a major factor in whether users will trust them to handle their money as well.
Head of technology, media, and telecommunications research at Mirabaud Securities, Neil Campling, said that this “hangover” from 2018 has given users an expectation of mistrust, and Facebook’s success will largely depend on how that issue is handled first.