David Marcus: How Facebook and Novi Wallet Repair the Global Fragmented Payment System

Why the way money flows must change

There have been many conversations and debates about stablecoins, cryptocurrencies, and other digital assets in the United States recently. I am very happy to see the discussion gain momentum, especially now. Because the transformation of our broken payment infrastructure has never been so urgent.

The pandemic has accelerated the expansion of the global digital economy. It has triggered changes in the way people buy, where they buy, and the way they discover and interact with companies. It has prompted many families to rely more on overseas remittances as an important economic lifeline. And this trend will continue-the percentage of global digital transactions is expected to rise from 57% before the outbreak to 67% in 2025. All this makes companies and policy makers more important than ever to help ensure that people do not fall behind.

However, there are still many obstacles in solving these challenges. At this critical moment, the United States should lead the change-but now we are in a secondary position, letting countries such as China take the lead.

In the process of leading the Facebook team, I also encountered these obstacles. The team has been developing Novi Wallet for more than two years-an interoperable digital wallet that will enable people, and ultimately small businesses, to be able to The transferred funds are sold domestically and internationally in a fast and affordable manner.

During this time, I have had many discussions about our choices and why we are so concerned about using stablecoins to build Novi instead of fiat currencies, or in other words, government-issued ones that we are all familiar with and use today Currency. I want to take the time to explain why this is important to us.

How stablecoins can help solve the problem

If we only provide fiat currency in Novi, it will bring a lot of value to people. We can provide domestic and cross-border payments, which will benefit Facebook because we will create a large number of wallet accounts. In turn, these will enable us to accept payments from Novi customers by charging competitive rates to merchants, thereby establishing a solid merchant service business. So why not do this and make it successful? Well, we might. But before we do that, I firmly believe that if there is an opportunity to create an open and interoperable currency agreement on the Internet and truly change the rules of the game for people and companies around the world, it is now. The fact that we participate as a member of the Diem Association, and in other ways, can help more companies to revolve around a standard, I don’t want us to waste our energy.

Although there has been a lot of discussion about stablecoins and their role in payments recently, stablecoins by themselves cannot solve any problems. In order to unleash their potential, they need to be combined with a cheaper, faster, safer, interoperable and programmable underlying payment network. A system that is more open than the current antiquated system, which has left too many people behind and has proven to be resistant to innovation. In fact, since the creation of the first credit card network more than 60 years ago, the current payment track rarely sees innovative new technologies.

It is important to understand that not all stablecoins are created equal. The definition of a well-designed stablecoin is the design and management of its reserves, the transparency of these reserves to consumers and regulators, and the consumer protection and compliance provided by the issuer. A well-designed stablecoin needs to always hold a 1:1 cash reserve in U.S. banks and short-term Treasury bonds, and the issuer holds capital as a buffer. It can be said that it provides better consumer protection than the legal balance held in any wallet in the United States. In fact, if all customers of a bank want to withdraw all their balances in a short time, even in a solvent bank, the bank’s withdrawal of its long-term assets into cash will be delayed. With a well-designed stablecoin, this risk does not exist.

In terms of anti-money laundering, anti-terrorist financing, sanctions and tax compliance, a well-designed stablecoin and its wallet ecosystem may improve the traditional implementation of these controls. By definition, digital assets are anonymous, which is a misunderstanding. Build and configure stablecoins and wallets in the right way, putting customer due diligence at the center of their compliance approach. When the control of stablecoins is designed to work in conjunction with the control of the individual wallets that support them, the potential for more effective detection and reporting of illegal activities will prove to be superior to existing systems that usually post-process and screen transactions before they are completed. After a long time. This method has released groundbreaking potential for preventing financial crimes more effectively. Contrary to many opinions, stablecoins with strong control at the network and wallet levels provide huge opportunities for innovation in this field.

When to let the best ideas lead the way

However, in the United States, our payment infrastructure can be said to be the worst of any developed country in the world, and it is becoming more and more backward. China is firmly building the infrastructure of payment channels, making the digital renminbi a challenger. World reserve currency. According to the 2019 Federal Reserve Payments Research Report, in 2018, automated clearing house (ACH) payments accounted for 66.1% of the value of non-cash payments in the United States. ACH was conceived in the early 1970s, and payment still takes up to three days to complete. At the same time, the transaction fees that merchants accept consumers to pay in the United States are ten times those in Europe.

Throughout our process of building Novi, we talked to many people who were excluded or underserved by the current system. I was shocked to hear that many people are currently not eligible to have bank accounts-in fact, many of them have accounts before. They think they cannot afford the extra cost and would rather pay 10% more to cash the check than be fooled by the cost they cannot pay. How can this be accepted by everyone? If we want to cheer up people and give them a chance to thrive, then the system that helps them protect and transfer funds should be accessible and serve them in a non-discriminatory way at a much lower cost.

This is why we come to Novi every day. We believe that we can help many people who deserve better to change things. In order to have the greatest impact, just building a closed system with fiat currency will not reduce it. We need to seize the opportunity to help build an open, low-cost, accessible, near real-time ecosystem and network. This is our vision for Libra in the summer of 2019 .

After we announced Libra, we publicly promised that we will not release Novi on Libra (now Diem) without obtaining the necessary regulatory approvals, and we will engage with regulators, policymakers and experts when developing products . We have been abiding by these commitments and have conducted constructive consultations with regulators and policy makers around the world. In the United States, we have obtained Novi’s license or approval in almost every state, and we will not start where such a license has not yet been obtained. The Diem Association has become an independent entity and has its own dialogue with US and global regulatory agencies. It solves all reasonable problems raised in the process of designing and constructing high-quality stablecoins with extensive consumer protection,

Nevertheless, during this journey, I have repeatedly heard various arguments that the payment and financial services industries should not allow Facebook to be part of these innovations.

First of all, Facebook has been a participant in the payment industry, and it has been for some time. We launched Facebook Payments in 2009, and in the past four quarters, we have achieved more than $100 billion in payments. We have a large number of thriving peer-to-peer payment products in the United States and abroad, and we can do more when we are properly regulated. People and businesses in more than 160 countries use our platform to make payments in 55 currencies. People can shop, purchase game props, donate and purchase activities in our application series.

Secondly, I found that this way of thinking is very non-American. I came to this country and became a proud citizen because of its value system. I have the opportunity to make products that improve the lives of many people and create a better life for my family. One of the core principles of our national value system is the commitment to a level playing field. Anyone or company that provides a reliable solution to a problem will have a fair chance. Although Facebook has more work to do in rebuilding trust, it has consistently provided great value to consumers involved in similar important services.

So I believe we should be treated fairly. We should play a key role in improving some of the conditions that persist for most people, and the US approach is to allow more competition and innovation to break the deadlock that has stagnated for decades. In addition, when the relevance of the U.S. dollar and our global influence are being challenged like never before, we should use the technology and capabilities of some of our most successful companies to win this silent war against our national interests.

Let me also talk about scale. Due to our large scale, we need to conduct additional reviews, which I understand and accept. Given Facebook’s influence, some people believe that Novi will be immediately used by hundreds of millions of people around the world. As we know from our experience of launching and expanding other payment experiences, this is not how it develops. No matter how long you use Facebook, people must make a definite choice to open a Novi account. As part of creating a new account, Novi needs to conduct a comprehensive due diligence on customers, including identification by uploading government-issued IDs, so the onboarding of new customers takes time. Novi will not be able to conduct business in specific jurisdictions until proper licenses are obtained and local regulations and standards are complied with, so we will conduct business in a few countries.

I have also heard concerns about our ultimate intentions. The argument is: “Obviously you want to make money from it, and you don’t do it out of good intentions!” I can’t blame people for this kind of thinking. But this statement stems from a misunderstanding of the technology industry and the spirit of most highly successful technology companies. We first focus on solving major problems for people on a large scale. Finally, found a way to maintain work through monetization. In this case, our business model is very clear. We are a challenger in the payment industry, and we will provide free domestic and international peer-to-peer (person-to-person) payments for those who use Novi Wallet. We believe that people will prefer free and more convenient services to services that are more expensive and not consumer-centric. Once we have a meaningful customer base, we can provide cheaper merchant payments to businesses all over the world and still earn profits from merchant services.

Where is the future of currency

Recently, I have been thinking about Zuckerberg (CEO of Facebook)’s vision for the Metaverse. Thinking about the flow of money in Metaverse is actually very helpful in how we design our products and the underlying infrastructure that supports them. After all, if money and payment systems were invented for the purely digital world today, what would they look like? They will certainly not resemble our current infrastructure. We need a global, open, interoperable, near real-time, cheap, and compliant global currency agreement to enable people, creators and businesses to seamlessly transfer funds and innovate through programmable currencies . The wallet needs to support NFT. Real contracts and titles will be replaced by smart contracts. Although this may sound out of touch with the reality experienced by the people we want to serve—those left behind by the current system—it is actually not the case.

The change should have happened long ago. Novi Wallet is currently ready to go on the market. It is regulated and we have full confidence in our operational capabilities to exceed our high standards for compliance. We believe that the delay in providing cheaper, interoperable, and more accessible digital payments is unreasonable. We will continue to persevere and prove that we can become a trusted participant in this industry, and by participating in it, we will bring positive changes to the world.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/david-marcus-how-facebook-and-novi-wallet-repair-the-global-fragmented-payment-system/
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