Facebook’s long-awaited digital wallet Novi has finally launched, in the form of a pilot on the US-Guatemala corridor. But how much does the blockchain-based money transfers platform challenge established remittance players?
The pilot version of Novi uses the Pax Dollar stablecoin, rather than the still-to-be approved Diem, Facebook’s in-house blockchain and cryptocurrency. As a result, there are still unknowns about Novi’s full service. However, there are some initial takeaways from the launch, which I address in my latest column for Forbes. Some of the highlights:
- The pilot significantly limits the number of active users, with only 200,000 allowed to hold or transact on the platform at any time. This may limit its full impact on the US-Guatemala corridor but as it’s purely for the trial, we won’t focus on user numbers at this stage.
- Novi is currently completely free for users, which has spooked some investors across the sector. But this is very unlikely to be the case long-term, particularly given Facebook’s own language on its pricing. Nevertheless, the platform is set to be low-cost for users, which may increase pricing pressure within the industry.
- It’s only available via its standalone app for now, but Novi will ultimately be available through Facebook Messenger and WhatsApp – putting it in front of over 2 billion potential users. This will inevitably give it a competitive edge.
- In the long term, Facebook plans to apply Novi to ecommerce and other financial services, suggesting it is ultimately looking to become a PayPal/super-app rival rather than just a challenger in remittances.
There is little doubt in Facebook having the user base, product and strategic capability to execute and take market share in remittances. What is much harder to assess is the strength of the political and regulatory headwinds Facebook may continue to face. Plus, there are difficult questions around whether US dollar stablecoins should be treated the same as the US dollar, not just in the US but in each overseas market they enter.