Newsletter #28 (Premium): Novi is Facebook's digital wallet. It allows users to move digital money between Facebook's apps for free and easily. And it's is going to be hugely disruptive. You only have to look to China and WeChat to see what is going to happen.
This week, Facebook announced the launch of Novi. Novi is the name of its digital wallet and is part of the Diem project.
This is BIG NEWS.
Because Novi will leverage the Facebook network of 2.7 billion users to provide a cheaper, easier and more convenient way to move money. In so doing, it will both increase the value of Facebook and drive even further usage from its global user base.
And, it will seriously upset the applecart and challenge the established (but slow and expensive) incumbent financial systems.
As nation-states grapple with how they will embrace the digital era and Central Bank Digital Currencies, whilst looking East and watching as China leads the way, Facebook sees the opportunity to establish a first-mover global advantage in the digital currency space.
Sending money as easy as sending a message
Today, the world is run on a network of financial systems that are slow, costly and silo'ed.
For the least well off in the world, these represent barriers to entry into their economy's banking system.
It is estimated that the number of unbanked globally is around 1.7 billion people (that's more than 1 in 5 of the global population without a basic bank account). And that's without counting the many more who are simply underserved by the existing systems.
These are people that have been left behind and left out when it comes to mobile payments, bank transfers and the like. They are stuck in a cash-only economy.
It was the goal of financial inclusion that proved to be a huge driver in China when they awarded banking licences to Alipay and WeChat in 2014. The Fintech revolution that followed had the effect of turning China into a (very near) cashless society. Read more about it here.
These old-world barriers are particularly obvious when it comes to moving money internationally, known as remittances or cross-border payments.
Even today, with all the digitalisation implemented across the network of financial systems, the average cost to consumers for moving money across borders is around 6-7%.
And it can take up to 3 days to move money across these systems, many of them designed in the 1970s and still in use today!