In the aftermath of Facebook’s unveiling of Libra and its Calibra wallet, among the many questions raised was how it managed to get so many of the “who’s who” in payments at the table. That was the question Karen Webster had for PayPal Chief Operating Officer Bill Ready when she learned that PayPal was one of those players.
The vision, she agreed, is undeniably big, bold and targeted at a worthy goal: the inclusion of the 1.7 billion people worldwide who are unbanked, and exist on the financial margins of society.
However, as she pointed out in her commentary on Libra’s odds of living up to its great expectations, the climb to get there is going to be unbelievably long, steep and hard. Those 1.7 billion unbanked consumers have been notoriously difficult to reach for a series of well-known reasons: Inspiring ignition in payment platforms is always incredibly challenging, and regulators have made no secret of the fact that they are less than enamored with this idea.
Not to mention, she noted, regulators worldwide have a long, proud history of “throwing up on cryptocurrency schemes” because they are, at base, not interested in sharing control of the money supply.
Ready agreed. There will be many rounds of conversations with regulators that will need to occur, with many details to be determined, and probably scores of issues not yet raised to be resolved.
However, for PayPal, he said, the decision was easy. One of the core reasons its platform exists is to serve the underserved and unbanked worldwide, and work in partnership with global infrastructure providers to make that happen. The chance to be an early part of the Libra Association, he noted, was to build the next generation of infrastructure to reach that last portion of humanity that is unbanked.
“This won’t happen overnight,” Ready told Webster. “When you look at these places with a high concentration of the unbanked, there are things we can do, but it is beyond any one player.”
Yet, by working together (if done correctly, Ready noted), it might not be beyond the combined efforts of many players.
Why Global Financial Inclusion Needs A Team Of Rivals
A study of the nearly one-third of the human population that lacks access to banking demonstrates the extreme difficulty in serving them. PayPal, he noted, has made a 20-year project of this — with lots of progress in areas where there are infrastructure providers it can partner with as a technology firm to advance the cause of digital financial services and provide more broad-based access. However, as one firm tries to reach that last remaining third, there is (almost) no infrastructure from which to build.
“That is the potential promise in Libra, with multiple major players coming together to throw their expertise and access in, because creating an underlying infrastructure of financial services and digital payments is bigger than any one of those players,” he said.
In fact, Ready noted, it is bigger than any two or three players working in tandem. This is a truly multilateral effort with many moving pieces, and much need for checks, balances and oversight.
“The intent for the early days of Libra is to agree on a commonly accessible infrastructure and set of standards that won’t be controlled by any one player, or beneficial to only it, but will open up something that can benefit many,” he added
Getting To Success
Ready noted throughout the interview that getting to success isn’t going to be a fast process. In the next year alone, in anticipation of the 2020 launch of the first interactions and uses, the process of writing a charter and creating those common standards is going to be a heavy lift on its own.
There will also be the not-small issue of regulatory hurdles. It is notable that, upon hearing the news, nearly all regulators who offered comment said something to the effect of “hard pass.”
Yet, Ready noted, that is all part of a process, and part of the value that PayPal and other established players — with long track records of maintaining positive regulatory interactions — bring into the partnership.
“There will be a lot of things to answer as we interface with regulators worldwide, especially around AML/KYC,” he said. “But we think there are good answers to that, and I think it will be part of the broad conversations we have with lawmakers.”
The Potential Gains
Infrastructure, Ready noted, is easy to overlook when one lives in the developed world. Things like the Federal Reserve or ACH networks aren’t part of people’s consciousness because they are just there, and they just work. Infrastructure is generally not too exciting to people, and doesn’t jump out as immediately monetizable.
However, when one steps back and looks at the nearly infinite number of things riding on top of those infrastructural pieces (and the extraordinary number of business models built out of them), one’s perspective of the monetary value of that infrastructure likely shifts some.
“Libra is about addressing and creating base-level infrastructure where it isn’t there first. But from there, if you can provide that, it opens the opportunity for a lot of monetization to potentially occur for a lot of different players in the same way you would see in developed markets,” he said.
How exactly that is going to work and function, he noted, is still under development. Yet, the long-term vision makes room for much differentiation in what comes next, built on top of the Libra scaffolding. There are many moving parts there, and more questions that still need answers. However, those answers, PayPal has determined, are worth finding.
“We think what we can create, collectively, will be well worth the effort,” he said.