Novi is coming! Are you ready for Facebook Bank?
What do you get when you combine the billions of social network users with a frictionless payments?
If Facebook is right, it could be the largest global retail bank by integrating the Novi Digital wallet with it's extremely large user base.
What is Novi?
Well first it’s a rebrand of their original concept, Calibra. That concept was for a digital cryptocurrency wallet that is integrated into all Facebook products. According to their press release, Novi has evolved to a standalone app to distance itself somewhat from the mothership. But never fear, it will be closely tied across the Facebook Eco-system
“With Novi, sending money will be as easy as sending a message. You’ll be able to use Novi as a stand-alone app, as well as in Messenger and WhatsApp. There will be no hidden charges to add, send, receive, or withdraw money and your transfers will arrive instantly. All Novi customers will be verified using government-issued ID, and fraud protections will be built in throughout the app. And, whenever you need it, you’ll have 24/7 access to our chat based support and customer care team.”
Where does Facebook fit in?
The Libra blockchain and payment network are the backbone of Novi. In December 2020 Libra changed it’s name to Diem (see a pattern?) Facebook teams played a key role in the creation of the Association and the Libra Blockchain, they have no special rights within the Association. Other members include Paypal, Uber, Lyft and eBay. But make no mistake, Facebook is the driving force here.
Why is Novi important to Facebook?
Facebook is an expert at monetizing it’s user data. But payments have always been conducted through a third party. With their billions of touch-points, they believe they can use the Diem blockchain and the Novi payment platform to revolutionize loans, money transfer, credit and commerce the same way they dominate social networks.
Who should be worried?
Traditional money transfer companies like Western Union and Moneygram will have another low-fee competitor for their digital business. Both view digital as their growth sectors and Novi has the potential to become the most dangerous threat to that channel. But at this point Novi does not have a cash-in/cash-out component so they still offer strong value in comparison.
Peer to peer payments companies like Venmo, Cash App and PayPal are the closest competitors and are used currently by Facebook accountholders. However, they require a credit card or bank account unlike Novi. If Facebook can provide Novi with the security, KYC and transaction verification expected, they can service the 1.7 billion unbanked people worldwide. But the other peer to peer companies tend to be strong in the younger social networks like Tick Tok and the older Facebook users prefer traditional payments (credit, debit, ACH). That's another reason for a stand alone app to attract the younger demographics.
Cryptocurrency companies like Coinbase will probably be the most impacted upon the launch of Novi. There are thousands of blockchain projects in the world and crypto exchanges like Binance and Coinbase trade 100’s of them. They make money off the spread and that can be enormous during a bull market. However, the top exchanges also have their own cryptocurrency (USDC, BNB, CRO) that they use for settlement. But the long term goal is to use them for payments online and at retail. This is the primary mission of Diem and Facebook wants it to become the crypto currency of choice for millions of retailers.
So are you ready for Novi? With Big Tech behind it, what could go wrong?