FILE - This July 16, 2013 file photo shows a sign at Facebook headquarters in Menlo Park, Calif. Facebook said in a Thursday, May 23, 2019 report, it removed more than 3 billion fake accounts from the service in the October-March period, although it doesn’t say how many it also missed. The report comes as Facebook grapples with challenges ranging from fake news to its role in elections interference, hate speech and incitement to violence in the U.S., Myanmar, India and elsewhere. (AP Photo/Ben Margot, File)
Facebook has a vast customer base, so charging small transaction fees in a market this size would add billions of dollars in revenue © AP

Facebook needs to work on its timing. The social media company launched its first home video calling device after a year of privacy scandals and was met with lukewarm interest. Now it seems intent on launching a digital coin and payments service before the scandal has been put to rest. Deals with trading houses, crypto exchanges and existing payments providers will mean nothing if users do not trust the company.

The allure of payments is obvious. Spending on Mastercard and Visa credit, debit, and prepaid cards in the US alone was $6tn last year, according to The Nilson Report, an industry newsletter. With over 2bn users spread across various platforms, Facebook has a vast customer base to draw on. Charging small transaction fees in a market this size would add billions of dollars in revenue. The company is also keen to reduce its reliance on advertising. It accounted for most of the last quarter’s $15bn in sales. It plans to rejigs its news feed to prioritise content from users over advertisers. 

Tech companies in the US look jealously at China, where omni-service apps like Tencent’s WeChat have multiple revenue streams. Close to 60 per cent of WeChat revenue comes from payments. Less than a third is from advertising. If Facebook could create a digital currency that ties together multiple payments services it would also gain access to a wealth of new information that would make its advertising business more valuable. 

To achieve this Facebook will probably have to work with third parties. Debit cards together with Visa, perhaps. Or a tie-in with fintech company PayPal. Ex-PayPal boss David Marcus leads Facebook’s project. 

But even if Facebook does launch a cryptocurrency why would anyone want to use it? Purchases can be done safely and easily with credit cards in stable, government-backed currencies. PayPal’s Venmo service already facilitates domestic peer-to-peer payments. Facebook has broken user trust with security leaks and privacy breaches. Facebook’s coin makes sense for the company, not its users. 

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