David Marcus, the Head of Facebook’s Financial Services Division, believes that Facebook and the Novi Wallet can help address the problems that plague the financial system. He shared this information through a blog post on August 18, noting that the current payments system has multiple flaws that either side-line or underserve a large percentage of the population. According to Marcus, 1.7 billion people across the globe are financially excluded, and an even bigger number is underserved.
In the blog post, Marcus pointed out that 62 million people in the US fall in the above categories, seeing as the current financial system is too costly and slow. On top of this, the system is not interconnected. To illustrate this, he highlighted the cross-border payments sector, which charges a 6.5% fee for transactions that take an average of three days to settle. Per Marcus, the current fee more than doubles the Sustainable Development Goal of 3%.
Marcus also pointed out that Automated Clearing House (ACH) payments accounted for 66.1% of non-cash payments in the US. However, the system is antiquated, seeing as it was developed in the 70s. To this end, it takes a long time to clear payments, and US merchants end up paying up to 10 times more than their European counterparts.
Out to do good
To this end, he believes the only way out is tapping into the benefits of the digital economy. While the onset of the COVID-19 pandemic fostered increased adoption of digital forms of payment, Marcus believes businesses and regulators must now take the wheel.
According to him, the Novi Wallet can offer people a lot of value if it supports fiat currencies. In turn, this would offer Facebook a lot of profits seeing as it would charge competitive fees to let people execute cross-border transactions seamlessly. However, the project has opted to create an open, interoperable protocol for money on the internet. In so doing, the Novi team seeks to introduce a game-changing payment option for people across the globe.
Highlighting how Novi can change the current situation, Marcus said he and his team work hard to ensure they lift people and give them a chance to thrive by helping them secure and move money in an accessible manner. He added that Novi seeks to cut costs and offer financial services in a non-discriminatory way. With this in mind, the Novi team decided that building a closed system that only supports fiats would not work.
Financial watchdogs continue hunting Facebook
Per Marcus, Novi has already secured licenses and approvals from almost every state in the US and is ready to enter the market. However, the Diem Association, formerly known as the Libra Association, has not obtained the regulatory go-ahead to complete the development of its Diem Stablecoin and network. Although the organization has lobbied regulators across the globe, it has come face to face with resistance because Facebook is a member.
However, Marcus believes that regulators and policymakers, especially those in the US, should loosen their tight grip on Facebook. According to him, Facebook has had its flaws in the past, but it has also successfully operated Facebook Payments for more than a decade.
He concluded by saying,
“We can and should play a key role in improving the unacceptable state of affairs that persists for too many people, and the American way to do it is to enable more competition and innovation to break the stalemate of decades of stagnation.”