How would you like to pay- cash, credit or Libra?
Face book plan to launch its crypto currency Libra with the aim that everyone uses it to make payments as well as store it as money. Companies like AT&T and Whole Foods have started accepting crypto as a payment option. But the question which keeps arising is that do consumers need to use crypto currency to pay bills?
At one end it may make sense for businesses to open up as many payment options as possible as some crypto currencies have very low or nil transaction fees than credit card and this way companies like AT&T can save money. On the other end, no one seems to be over enthusiastic to make payments using crypto currency. Even P**nH*b started accepting crypto currency but hardly 1% use this option.
Libra wants to make crypt currency a viable payment option across Face Book, Whatsapp and Instagram, companies like Visa and MasterCard will be backing them and it will be supported by companies like Uber, Spotify and Lyft. Face Book will not have full control over it, as it will be managed by Libra Association, but Face Book will build it its own wallet and payment processor based on Libra. This will give the ability to its billions of users to make payment using Libra and also store it.
Bu the first problem which Face Book will face is to convince its users to buy Libra and then use it to make payments. To use a crypto currency the people will face two problems or dilemma – first is acquiring it and second is to find the worth of it. We face this type of problem when we go to a different country, like what is the value of Yen against Euro, where to trade it so that I can get a better rate? Why would people want to use it crypto when it is so much hassle free with a credit card?
BitPay and Flexa like payment systems have simplified the process for crypto currencies. Companies like AT&T and Whole Foods can partner with them and users can connect their wallet to these payment processors. Users can buy crypto currency from any of the exchange and transfer them to BitPay.
According to a study in 2018, only 5% of American held Bitcoin and most use it as a store value eyeing for growth in investment. So it is more like investing in a super volatile stock market than for paying bills. In recent years it has gone from $20000 in Dec 2017 to $3500 7 months ago. Anyone who can buy low and sell high can make a good amount of money out of Bitcoin, rather than willing to pay bills. It exists in the legally grey area with huge potential for earning or loss.
This feature doesn’t make it a currency which any one would not like to use for paying bills. If you have a phone bill of 50 dollars and it is due then you have to pay it. If on the day of payment the value is low then you will be making a loss. No one likes to pay with an asset that vary in value with time, would anyone like to pay the bills with a stock like Apple or Face Book?
Gaming store Steam dropped Bitcoin as a payment method in 2017. When users transferred crypto currency, by the time the transaction was processed, its value changed. BitPay tries to address this problem by locking the rate during transaction.
Libra is designed to work more like a stable crypto currency by linking it to an existing fiat currency. This solves one problem, but not all. It would still require some extra steps. You are paid in a fiat currency, and then you will have to convert it to Libra and then you will hope that the store accepts Libra as a payment option. Until then it is kept in some wallet and the currency can be used in only few places. Will it not be better to just keep it in the bank and pay using your debit or credit card?
In banks there may be a minimum balance requirement and hefty fees for credit card use, which is not the case with most crypto currency. Face Book is hoping that if the payment fees are kept low and a large number of businesses accept Libra then it can give a modern banking experience to more than a billion people.
Due to these inconveniences as of now Libra or any other crypto currency are not in a position to make it a part of our daily life.
Nice one