Lines are blurring between fintech banking and consumer digital wallets, major consumer brands have much to gain and more to lose as the race to serve future customers with their own unique currencies accelerates
‘Brand name’ corporate run cryptocurrencies received a massive awareness boost earlier this year when Facebook and partners ‘Libra consortium‘ and associated Facebook ‘Calibra’ digital wallet were announced back in June.
What followed, in a world still dominated by often justifiable perceptions of cryptocurrencies as scams and ponzi schemes, was a major backlash over Libra & Calibra with some of Facebook’s twenty seven foundation partners in Libra backing away following serious concerns expressed, July US House Financial Services Committee government hearings and the European Union asking for more details to examine.
It’s hard to think of a tech company who have fallen foul of regulators more than Facebook after years of generating paranoia and mistrust about their intentions and controversial exploitation of their user’s data on their various social networks (Facebook/Whatsapp/Instagram). They are arguably a poster child of precisely who should not be running what is effectively a global currency after their various missteps and apologies, but they have little to lose in attempting to expand into financial technology, and a huge amount to gain if they succeed.
The situation is markedly different for global companies with trust reputations and credibility to protect. Building up customer relationships and comfort levels takes a lot of time and money and can be let down in an instant by a lapse of judgement or failure. The crown jewels of large business entities are their brand image and we are rapidly entering a global era where that brand image can and will include digital wallet currencies with multiple use advantages over fiat currencies. Association with ‘poisoned’ brands like Facebook is an efficient way to bleed away trust and understanding in this critically important new consumer experience, which has to delight and not undermine confidence.
Walmart revealed some details of a USA patent they applied for in January 2018 on August 1st for a digital (‘stable‘) coin tied to traditional fiat currencies that will ‘enhance payments and include loyalty features on the consumer side while having business to business attributes on the supply chain side. This example of strategic planning (along with multiple other forward looking Walmart patents) are visible examples of the many projects in the works at large brands. The US Federal Reserve announced plans last month to launch its own fintech real-time payments system ‘FedNow‘ by 2023 or 2024 to modernize and speed up clearing system transaction speeds while heading off the ‘challenger banks‘ that have strong momentum in Europe despite missteps. Last summer I wrote a widely read post here on ZDNet ‘Cryptocurrency: The bubble is over, here comes the boom‘ about the rapid evolution of cryptocurrencies as the serious players entered the market and scaled up. While a great deal of activity is still behind the scenes and heavily influenced by regulator grey areas and realities, Libra, Walmart and other examples are now very visible signs of this coming wave of large scale digital currencies.
In China, which as a nation is well ahead of western Europe and the USA in usage of digital, Changchun Mu (a former People’s Bank of China deputy director of payments and settlement division) is China’s ‘Digital Yuan’ lead at their Digital Currency Research Institute. This is digital transformation on a global scale. WeChat, the ubiquitous Chinese social network, has Alipay at its center, enabling seamless transactions alongside a single instance of most western social apps rolled into a one stop personal digital agent (and government surveillance monitoring device).
It is hard not to imagine a future western word where existing major global retail brands run a similar service to We Chat, enabling people with limited access to current ‘traditional’ banking services to avail themselves of new currency types and where supply chain ecosystem transactions are conducted in unique brand currency all the way to consumer purchase. A business vacuum is building up to offer western mobile first consumers these types of convenience.
What is holding back western development of digital ledger technologies at scale while continuing to allow financial investment grey areas to flourish is largely a lack of clarity around securities laws from regulators at the SEC (Securities Exchange Commission) in the USA and the FCA (Financial Conduct Authority) in the UK. The normally stern SEC clearly had a sense of humor with their educational ‘HoweyCoin’ website in spring 2018, an educational site with a scam coin offering ICO picked apart to demonstrate red flags for unaware investors.
As we prepare for 2020 and beyond, the need for guard rails and guidance to help next generation firms and legacy retailers do the right thing while investing and scaling to provide value to build and retain trust is becoming critical. Smaller sovereign states such as Malta and Lichtenstein have created European Union compliant legal frameworks but these are not yet robust enough to build out large scale global trust networks on, and the 800 pound SEC & FCA gorillas overshadow the legality of this landscape.
There is everything to play for in this inchoate new space and much to lose as the clock ticks and strategic plans are made. Putting together the next generation jigsaw of digital elements to form the services and facilities future customers will expect is happening now, and no effort should be spared to get it right with high stakes to win and with legacy brands asleep on these realities quickly fading into insignificance. Filing patents and public relations proclamations about possible future states need to be be replaced with well thought out, practical and workable business models far sooner than most people think.