October 5, 2019

Paypal Leaving Libra is a Relief

I'm not a big fan of Paypal. Unfortunately, I'm pretty much forced to do business with them. Having to deal with Libra as well, would be even worse.

Ok, by now we probably have all read the brochure. Libra is a crypto currency build on block chain technology (eh, why exactly?) that is somehow suppose to provide everyone with a bank account (apparently the definition of happiness). Let’s say, that vision came through and even the poorest can finally wire money (assuming they can afford a smartphone). Would that that be be heaven? Sure, the question is just for: whom?

I like to imagine that the brainstorming session at Facebook HQ went something like this:

MZ: Guys, we bought Whatsapp, but with encrypted messages, we can't profile users. How do make money from this?
XY: Well, actually this whole profiling idea is bullshit anyway…

*crickets*

MZ: Pardon?!
XY: Think about it, we collect tons of data to categorize our users for our advertisers. It's not only giving us a bad rep, but it's also inefficient. We are only guessing what users might spend money on in the future. What we should be doing is tracking what people already bought in the past…
MZ: Yeah, nice point, but how's that gonna help us with Whatsapp?
XY: Well, what if we build a payment gateway into our platform? That way we could not only improve ad targeting and, in result, raise our commission rate, but also charge transaction fees from our zuckers users. That's basically charging both ends for the same service!

*more crickets while jars are dropping*

MZ: Brilliant! But we are talking about entering a market with well established players here. We don't have experience in it, not to mention that people don't really consider us to be trustworthy enough to handle money…
XY: No worries. Let's simply make this a joint effort. We get the competition in the boat by telling them that we will share the cake. Then we build this thing as a semi public blockchain. That way, they'll end up serving us their own users on a silver plate. We may not get transfer fees from every transaction, but we do get to expand our reach and ability to profile.
MZ: An association. Sounds risky.
XY: For whom? If we pitch our userbase to all the big players at once, none of them can afford to miss out. They will have to back the project with their money and credibility, but in the end, people will go with the payment gateway, we build into Whatsapp.

If things go according to plan, Libra eventually becomes the new dollar and the defacto standard for money transfer.

Facebook advertises Libra as the means to enable everybody to participate in the economy, but neglects to mention that this works both ways. Show of hands please. Who has heard stories about Paypal freezing accounts or Google banning users from Wallet? Is anyone really keen on putting the power to basically end anyone’s (economic) existence in the hands of a private company?

Let’s hope that Paypal was only the first to jump ship, others will follow and the whole thing fizzles out of existence before even manifesting itself.