Facebook Libra And Reliance Jio Compete With WeChat By Targeting The Unbanked

Journal of Political Risk, Vol. 8, No. 9, September 2020

Source: Tim Bennett, (Unsplash).

Vikram Chopra
CEO of Gift Jeenie

There’s a technology arms race developing between the West and China. At the frontier are emerging technologies such as 5G, Big Data, AI, Blockchain and Crypto. China already has an advantageous position in many of these areas, including 5G and AI, and is looking to challenge Bitcoin and the US dollar with its digital Yuan.

Facebook’s recent moves with Whatsapp and Libra are interesting strategies in this larger game of global tech domination where the likes of WeChat and TikTok have been resoundingly successful market leaders. A big reason for the success of WeChat is its complete market domination within China’s 1.4 billion population. Furthermore, Wechat has seamlessly integrated into the daily lives of its users. It’s more than just a chat application: it’s a platform for shopping, ordering groceries, booking travel, dry-cleaning, reserving a table at a preferred restaurant and sending money among other services. Add the 40 million global Chinese diaspora who use WeChat to communicate with loved ones back home, and you can see why WeChat is one of the leading social media networks with over 1.2 billion users globally.

Prior to the Trump administration’s latest trade salvo, WeChat’s parent company Tencent was worth more than Facebook. Facebook’s objective with Libra, WhatsApp and investment in Reliance Jio is to make Facebook membership more valuable, thus expanding its member-base by becoming a one-stop shop for everything the company has to offer, much like WeChat in China.

First, let’s start with the opportunity for Crypto. Cryptocurrency has many detractors but its biggest selling-point is its ability to deliver “financial inclusion”. Globally 1.7 billion of the world’s population lacks access to a bank or financial institution. Services such as Western Union and Moneygram generate $50 billion plus in annual revenue by targeting the “unbanked” segments of the global population.The unbanked may not have access to a bank, computer or even a landline, but they do often have access to a cellular phone.

There are several gaps and bottlenecks with existing payment and money transfer services, especially when sending money abroad. Anyone who has tried sending money internationally can speak to the cost, process and time involved to both send and receive international wires. Cryptocurrencies such as Bitcoin could potentially address this challenge.

On the flipside, the advent of Cryptocurrency and ICOs (initial coin offerings) has led to the advent of cryptocurrencies with little to no value, or a digital currency with no discernable purpose. The challenge for Bitcoin and many of the various Altcoins in the market is the lack of sufficient market reach or adoption. It would be difficult for cryptocurrencies such as Bitcoin to become payment methods without wide-spread adoption by both consumers and merchants. In its present form, Bitcoin and many other cryptocurrencies are not very “liquid” or widely in circulation among the mainstream.

This is where Facebook comes in. Globally Facebook and Whatsapp have 2.45 and 2 billion users respectively. India is the largest market for both Facebook and Whatsapp, each with 260 and 400 million users. In addition, Reliance Jio is India’s largest telecom player with a rapidly-growing user base of 400 million users. Reliance Jio is also a market leader in the Indian 5G space and has partnered up with Google to launch affordable 5G phones in the Indian market. These low-cost 5G phones would also be targeting the unbanked segments of the Indian populace. This partnership with Reliance strategically positions Facebook to do in India what WeChat did in China. The number of smartphone users in India will reach 442 million by 2022, demonstrating the potential of India as the largest untapped market in the world.

WeChat built an e-commerce platform on a messaging app, inspiring Facebook to replicate on a global basis what WeChat accomplished in China, by starting with India. The integration of messaging and payments along with access to the Reliance infrastructure provides Facebook a template to replicate in other emerging markets.

Therefore, Facebook with its various affiliates such as Whatsapp and partnership with Reliance Jio has access to the largest consumer base in the world for its Libra project. This gives Facebook a distinct competitive advantage over any existing Cryptocurrency project: an active and vibrant user base that can drive mass adoption. Leveraging the Whatsapp messaging gateway, which includes those not covered by formal banking,  Facebook has the perfect hook to entice its users to use its messaging ecosystem as a global and local payment/money transfer solution. Similar to WeChat, there is tremendous ease of use for users who are already using Whatsapp to communicate with their loved ones, and to use the same platform to send money and make payments. In the Americas, Europe and Middle East, the remittance community of Filipinos, Indonesians, Indians, Central Americans, Pakistanis, Bangladeshis and others are all on Facebook because they can communicate in their own languages. These users can potentially swing to Libra and Whatsapp Pay. After its pilot project in India, Whatsapp pay recently received approval from the Brazilian Central Bank, speaking to its global ambitions

If Facebook and Reliance Jio are successful in enabling trade and business through WhatsApp, then they are well on their way to turning WhatsApp into a global superapp, akin to the position WeChat enjoys in China. The Libra component drives financial inclusion and enables micro businesses to grow, further expanding Facebook’s market dominance.

Vikram Chopra is the CEO of Gift Jeenie, a blockchain powered, consumer data rewards platform. He spent the past decade working with emerging technologies such as cloud services, artificial intelligence, automation, big data, blockchain and 5G.