July 5, 2019
Facebook, cryptocurrency and trustContact
How much trust do you place in the hands of social media companies? And are there some things you would never trust them with? These are some of the questions that are front of mind following Facebook’s recent announcement of its intention to launch ‘Libra’, an own-brand cryptocurrency that is expected to land in 2020.
With over 2 billion monthly users worldwide, Facebook continues to be a global powerhouse when it comes to social media and is using this influence to branch out into new areas. However, as the social media behemoth has grown, so has its tendency to attract criticism.
Critics of Facebook had a field day in 2018 when it made global headlines after millions of profiles were exposed and breached through the creation of a software by Cambridge Analytica.
The scandal left users questioning how dependable and transparent founder and CEO Mark Zuckerberg is himself due to his prolonged silence when the news broke: as they say, silence often speaks louder than words.
It is in this context, months after what seems like a record year of criticism, that Facebook has announced the launch of ‘Libra’. To accompany the launch, Facebook has also created ‘Calibra’, a mobile wallet that will allow consumers to send and receive the cryptocurrency.
With Facebook barely out of rocky waters with their previous problems, is it too soon for it to be dipping its toes into the banking world, where the relationship with the consumer is dependent on openness and assurance?
All about trust
In April 2019, it was reported that just 44% of people trust social media. Interestingly, trust in blockchain – the technology underlying cryptocurrencies – is not much higher, at only 56%. Consumer trust in mobile wallets is similarly low at 52%, a 7 percentage point decrease in the last two years. Lastly, to top it all off, cryptocurrency is distrusted in a vast majority of markets with only 37% of consumers trusting the concept.
In short, a social media company with an already teetering reputation is now launching a little-trusted form of currency, operated with the help of similarly mistrusted blockchain and mobile wallet technology.
A consumer deposits their money in a bank because they fundamentally trust their money will be safe there. This extends to personal data and information as well. The challenge for Libra when it launches is clear: given Facebook’s recent track record, the scepticism around blockchain and cryptocurrency, along with the importance of trust in consumer financial services, will Libra gain sufficient confidence of consumers in order to be successful?
The perfect storm
It is safe to say that people are using social media more now than they did five to ten years ago. On average, 16 to 24-year olds are spending approximately three hours a day on social media. Meanwhile, 25 to 44-year olds are spending somewhere in the two-hour range and 45 to 64-year olds spend between one hour and 13 minutes to an hour and 39 minutes a day on social media.
Clearly, as a society we have grown dependant on social media. We rely on it for communicating, boosting (or at least attempting to boost) our self-image, and more. Whether we like to admit it or not, social media platforms have become some of the most powerful and influential companies in the world.
However, should we be letting Facebook take their control one step further into the financial sector? Facebook already controls the way we interact with one another. Are we going to let it control how we bank as well? If we are, then Libra (and Facebook) need to show that it will act responsibly and that it can be trusted.
Clear, concise and timely communications between now and the launch will be essential in achieving this. Anything less and Libra risks being caught in a reputational storm where the poor reputations of Facebook, cryptocurrency and blockchain undermine the concept. For Mark Zuckerberg, it is the perfect storm he will want to avoid to ensure that unlike 2018, 2020 isn’t another annus horribilis.