Did Facebook create Libra for the unbanked or for a different reason?
Take a quick glance at Facebook’s Libra coin and you’d be right to believe Libra exists for purely altruistic reasons.
Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.
Facebook claims that Libra can drastically improve the lives of the 1.7 billion adults globally called the unbanked – people who remain outside of the financial system with no access to a traditional bank account.
And yes, conceptually…Facebook is on the right track.
Blockchain-based technology and cryptocurrency has immense potential to help the world’s marginalized people overcome significant hurdles they are faced with today.
For example, low-income people are constantly in fear of high transaction fees when sending money to family members, overdraft charges, ATM fees, or outrageous payday loan interest rates.
As with other digital coins, Libra could make a huge dent in helping to legitimately solve these problems.
People worldwide could easily pay for local goods and services, shop online for the first time, or even send money to family members in another country.
With cryptocurrencies like Libra, transactions can theoretically be processed with extremely low or even zero fees – unlike the large fees Western Union charges to send money across borders or the credit card processing fees merchants have to pay when you buy anything using a credit or debit card.
In Facebook’s own Libra white paper, Facebook sums up the problem perfectly…
When people are asked why they remain on the fringe of the existing financial system, those who remain “unbanked” point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation.
There’s also a correlating issue most unbanked people face – they have no government-issued identification.
This sadly makes sense as without a valid ID, you can’t get into the banking system.
For anyone in the developed world, spending a few hours at the DMV to get a driver’s license isn’t too much of a hassle – especially if you already have a copy of your birth certificate.
But think about this…
According to UNICEF, 65% of children under age 5 living in Sub-Saharan Africa don’t even have a birth certificate.
If you’re lucky enough to have a birth certificate and live in some parts of Africa you’re still out of luck.
It often can take multiple days to travel between your village and a government office that issues ID cards. Those same countries can charge around $13 for an ID which is less than you’d think until you realize $13 is about half of one month’s salary for the affected people. According to Kiva, that would be similar to a U.S. citizen spending around $1,200 just to get a photo ID.
Clearly, getting a government-issued photo ID is a challenge for many of the world’s people.
Warning. Here’s the part where you’re going to start to doubt Facebook’s altruism. Get ready.
It turns out that to get Libra and take advantage of the life-changing world Facebook is building for all of humanity, you will need Facebook’s Calibra Wallet application on a smartphone.
That’s a bit of an issue, but not for everyone as about half of the unbanked have some kind of inexpensive smartphone.
But…guess what you need to activate your Facebook Calibra Wallet?
A government-issued photo ID!
Notice something wrong with Facebook’s mission statement around Libra being designed to help the unbanked?
So the question now becomes, “Who is Libra really designed to help if many of the unbanked won’t be able to get Libra in the first place?”
I have a great theory, but we’ll save that for another day while we wait for Facebook to release more Libra details leading up to the launch sometime in early 2020.
Photo credit: Public Domain Pictures