This archive report was first published on 28 July 2019.
On July 28, 2019, Facebook announced its new digital currency, Libra, sending shockwaves through the banking industry.
According to Sunny Bindra, a banking expert, the biggest threat to traditional banking will not come from fintechs or other banks, but from Big Tech companies like Facebook.
Bindra warns that Facebook's dominance in the market, with its global brand acceptance, billions of users, and access to the best brains, makes it a formidable player in the payments industry.
Libra, which is designed to be a stable and convenient way to send money across borders, could become a major payments platform for e-commerce, sidestepping credit-card and bank fees.
With its ability to handle 1,000 transactions per second, Libra could also enable smart-contract settlements, loans, and insurance.
Regulators have expressed concerns about Libra, but Bindra notes that this is not the first time that traditional banking has underestimated the potential of a new payments system.
He reminds bankers that M-Pesa, a mobile payments system in Kenya, was once seen as a threat to traditional banking, but it eventually became a major player in the industry.
Bindra's warning is clear: traditional banking needs to adapt to the changing landscape and find ways to compete with Big Tech companies like Facebook.
He advises bankers to focus on removing frictions, improving speeds, designing smart interfaces, and reducing fees, and to be prepared to collaborate with new players in the industry.
As Bindra puts it, 'If you haven’t been doing that with any seriousness, tomorrow morning is already too late. Otherwise, prepare to be “M-Pesa-ed” all over again, bankers. It will hurt.'
