Banks also cite their own competing payment projects and past failed digital wallets as reasons to be sceptical of Libra
Major banks in the US and Europe have voiced scepticism around Facebook’s Libra cryptocurrency project, citing regulatory concerns and the fact that Libra could be seen as a competitor to their own coin projects.
Some also said they were dubious that a digital wallet could take off, citing the lukewarm response to Apple Pay’s wallet feature, which was heavily promoted by banks when it made its debut in 2014.
No banks were present amongst Libra’s dozens of initial backers when the project launched last month, although Facebook has said it is in talks with banks and expects banks to have joined the Libra Association by the time the paroject launches next year.
The association’s founding members include Visa, MasterCard and PayPal.
‘There’s something there’
But the head of innovation at an unnamed US bank told the Financial Times there was a “huge amount of scepticism” around Libra in the banking industry, although he acknowledged that the project had enough major backers “to say there’s something there”.
A senior executive at another large US bank, however, said the sums put up by Libra’s initial backers were “not big… in the scheme of things”.
Abeer Bhatia, president of card marketing, pricing and innovation at JPMorgan Chase & Co., told Bloomberg that while customers have shown themselves open to new payment methods such as contactless, that hasn’t been the case with mobile wallets such as those those offered with Apple Pay or Android Pay.
Apple Pay and Android Pay use the same near-field communications (NCF) technology as standard contactless payment cards.
Facebook’s user base of 2.4 billion appears to offer a massive immediate market for the low-cost payment services it plans to offer with Libra.
But bank executives said Libra would have to abide by existing transparency and anti-money-laundering rules, which would heap costs on the project.
Facebook has promised to abide by all banking regulations, but it has a history of riling regulators over its approach to data protection.
And a senior executive at a large US bank told the FT that Facebook had already mishandled the regulatory aspect of Libra by announcing the project before obtaining regulatory backing.
Banks also said they saw Libra as competing with their own initiatives.
Those include The Clearing House, a US payments company backed by 25 large banks including JPMorgan Chase, Bank of America and Citigroup that offers domestic real-time payments within a network, and a real-time transfer being developed by six Nordic banks in cooperation with MasterCard.
JPMorgan is experimenting with the JPM Coin digital coin for corporate payments, while in June 13 major banks including UBS, Lloyds Banking Group and MUFG announced backing for another digital coin to be used in wholesale banking.
A senior executive at one of the banks involved in those banks’ “universal settlement coin” told the FT that banks were targeting the same problems with cross-border payments targeted by Facebook, and that they would “solve this problem and solve it pretty quickly”.
Over the weekend Mu Changchun, deputy director of the People’s Bank of China’s payments department, told the Caixin news agency that Libra showed promise as a global currency but also risked disrupting monetary policy and could cause foreign exchange risks in economies with a volatile local currency.
Facebook hadn’t yet made clear its commitment to anti-money laundering, transparency and data protction requirements, Mu said.