Visa, MasterCard, eBay, Stripe, Mercado Pago announced on October 11 they will no longer be part of Facebook’s libra cryptocurrency project. Lack of support from key payment systems can have serious consequences for the Facebook crypto project. Their withdrawal clouds the Libra’s future and calls into question its success.
Here’s strategic losses of the Libra Association caused by the exit of these companies:
Visa & Mastercard
As one of the most widely accepted payment methods, Visa could help make Libra globally acceptable. Moreover, the support of one of the most prestigious brands in the financial sector would bolster the legitimacy of the cryptocurrency. The Visa’s exit makes the Libra just a tech company’s token which is seeking to take a place in the field of payments, conjuring fears of their future. Visa’s withdrawal could also leave Libra with a weaker presence in brick-and-mortar shops.
Visa and MasterCard’s participation in the Libra Association made Libra look like the incumbents adapting to modern technologies. MasterCard could also provide access to a wide network of outlets where Libra holders could potentially make purchases. Now, Visa and MasterCard may be interested in active work against Libra, which is able to make their services less popular by reducing transaction fees thanks to the blockchain technology. Libra’s two main partners have turned into its potential rivals.
Facebook has repeatedly told regulators that the Calibra wallet, as well as the Messenger and WhatsApp app, will not be the only Libra wallets, meaning PayPal. Now the Libra Association has lost access to the huge network of outlets supported by PayPal, as well as the possibility of integration into PayPal’s peer-to-peer payback app Venmo. PayPal persuaded the general public to trust online payments — that was the kind of trust Facebook needed.
Stripe’s popularity with e-commerce vendors has made it an important member of the Libra Association. The ease of integration of Stripe solutions made it a top pick for developers Facebook surely hoped would build atop Libra. The exit of Stripe has destroyed the crucial link with the fintech startups ecosystem, which could be useful for Libra institutionalization. Now the Libra Association will have to develop payment widgets from scratch without Stripe’s assistance, which may slow down the spread of cryptocurrency.
eBay is one of the longest-standing player of the e-commerce space. It was expected that Libra would be used to conduct transactions between eBay users without the participation of expensive intermediaries. E-commerce platform could also help to integrate the Libra into western online marketplaces. Without eBay and similar companies support users will have less opportunity to use Libra.
Mercado Pago helps merchants receive payments via email or in installments. At the very core of Libra lies the idea of serving residents of regions where access to financial services is limited. At the very core of Libra lies the idea of serving residents of regions where access to financial services is limited. The Mercado Pago withdrawal makes Libra a tool for grabbing financial power rather than a solution for assistance to needy regions.
Partnership with Booking.com, Priceline, and Kayak would allow Libra to reduce transaction fees on travel reservations. The exit alongside eBay eliminates the most popular big cart e-commerce partners of Libra.
To sum up, to date, the Libra Association includes venture, ride sharing, non-profit and crypto companies. These partners support the Libra development, create opportunities for the daily use of the Facebook’s stablecoin, bring the crypto to developing countries and ensure interaction with crypto market players. To launch Libra, Facebook will have to carefully review its original plan, otherwise the company will continue to face resistance from regulators, lose its members, and ultimately turn the project into a one-man attempt to revolutionize the economy.