Meta’s initial digital assets venture, meanwhile, ended up a failure: ill-conceived and ill-fated.
The U.S. tech giant’s inability to capture significant market share in digital finance illustrates the perils of complacency – an occupational hazard of Big Tech – and limits of the super app concept.
The super app that wasn’t
Beginning with Alipay and WeChat Pay in China, large platform companies in Asia sought to centralize a suite of digital services in a single app, with fintech the key monetizer. Alipay and WeChat Pay would never have become so dominant in China if not for their ability to serve as digital banks for the world’s largest consumer market.
The Chinese super apps spawned many imitators, some more successful than others, from Kakao in Korea to Line in Japan to Grab, GoTo and Sea Group in Southeast Asia. While these companies face challenges reaching profitability, chances are that they will get there eventually and when they do, it will likely be on the back of their digital financial services.
Facebook has significant market share as a social media platform in many Asian countries – and thus a potentially enormous user base to which it could sell digital financial services. For instance, of Facebook’s 10 largest markets, 7 are in Asia: India, Indonesia, the Philippines, Vietnam, Thailand, Japan and Pakistan. Facebook also has a commanding presence in Taiwan, with 18.6 million users in a population of 23.2 million.
The main problem is that Facebook arrived late to the game. There are regulatory barriers to entering financial services in many Asian countries, not to mention intense competition among e-wallets and online banks.
Customer trust, the paramount factor in financial services, is also a significant issue. Given its history of playing fast and loose with user data, Facebook does not come across as the most reliable financial services provider.
Betting on WhatsApp Pay
Meta’s best bet to tap into Asia’s fintech boom is through WhatsApp, which is one of the most popular messaging apps in several large Asian countries. According to the BusinessofApps, India is the largest market for the messaging app with 390 million users, Indonesia is third with 112 million and the Philippines is fifth with 88 million.
Thus far, WhatsApp has focused on India with good reason. In theory, the subcontinent offers it tremendous growth potential if it can sync its messaging app with a suite of digital financial services.
Unfortunately for WhatsApp, in India it has encountered a perfect storm of protectionism, intense competition and rising concern about user data security. For these reasons, despite that massive user base and the fact that India is one of the world’s most dynamic and fast-growing digital payments markets, WhatsApp Pay remains a negligible player there.
WhatsApp Pay has a market share of India’s paramount retail payments rail United Payments Interface (UPI), somewhere in between 0.5% and 1% by most estimates. In comparison, Walmart-backed PhonePe has more than a 50% market share. Google Pay has about a 35% share of the market.
While WhatsApp Pay could improve its position in India in the future, we won’t hold our breath. The UPI leaders are well entrenched. PhonePe is ascendant, having just received a new investment of US$350 million, while Google’s digital services ecosystem in India runs deep and wide.
Another market where WhatsApp Pay might be able to grow significantly is Indonesia. The trouble is that the rumored launch in Southeast Asia’s largest economy never happened. The first media reports about that possibility emerged in mid-2019.
Instead, WhatsApp Pay has focused its energies on the Brazil market, partnering with a number of Brazilian banks. So far though, it has run into differences with its local partners that have prevented the company from gaining substantial market share.
The most undistinguished of Meta’s fintech ventures has been its crypto project, starting with the Latin nomenclatures that don’t align with the company’s brand. The initial name “Libra” brought to mind astrology, while the rebranded “Diem” had many observers wondering just how Facebook planned to “seize the day” with its hasty expansion into digital assets.
One of the more cringeworthy moments came when Mark Zuckerberg tried to persuade the U.S. Congress to back the Facebook crypto project to ensure America would not fall behind China in digital money. Of course, he did not distinguish in his remarks the difference between the e-CNY, a central bank digital currency developed by the People’s Bank of China, and Libra/Diem, a USD-backed stablecoin that never received any official government support.
“Libra will be backed mostly by dollars and I believe it will extend America’s financial leadership as well as our democratic values and oversight around the world,” Zuckerberg told Congress in October 2019.
Even if we cut Zuck some slack – he was after all, trying to sell a crypto project to the China-wary U.S. Congress – the idea of Libra/Diem extending U.S. financial leadership (some might call that “dollar hegemony) and democratic values (no comment) strikes us as a poor sales pitch for Asia, where many regulators have been cautious about cryptocurrency.
It is probably for the best that Facebook did not get further with its crypto project in Asia as crypto-skeptical regulators like the Reserve Bank of India (RBI) would have had one more reason to scrutinize the company’s expansion into financial services.
Fintech in the metaverse
Now that it is focused on the metaverse, Meta will inevitably try to explore fintech opportunities there. So far, its performance looks like more of the same: This company lacks a sense of what works in digital financial services and what does not and/or doesn’t allocate the resources to make it happen. Payments always seems to have been an afterthought.
To that end, Meta’s crypto payments wallet Novi did not even last a year. It was launched as a pilot in October 2021 and terminated in September 2022. Meta has not explained why it pulled the plug on Novi.
Nor has Meta’s reported testing of support for NFTs gone anywhere yet. Maybe that is for the best given the plummeting value of Bored Ape Yacht Club digital collectables.
For now, the metaverse remains more hype than reality and in Asia, Meta is still Facebook: a platform used for communication and entertainment, but not banking.