Facebook (FB) has big plans for expanding in the world of financial services. It wants to become the planet’s preeminent digital wallet and supplant established players like PayPal (PYPL) in the process.
The social network's Novi division will be “a next generation digital wallet” built upon cryptocurrency that will be nothing short of a new “protocol for money on the internet,” according to David Marcus, head of Facebook Financial, who's taking the lead in launching Novi in the coming months.
Facebook aims to create something with capabilities that people are compelled to try at least once, especially when they need to send money overseas. But Facebook knows it has something pressing to take care of before people widely embrace Novi. “We plan to earn people's trust,” Marcus said. "...But it will take time, and I'm cognizant of that."
Facebook has struggled to gain people's trust for years, especially after the Cambridge Analytica scandal in 2018, when reports emerged that a firm hired by the Trump campaign had harvested the data of millions of unwitting Facebook users.
Marcus — a former PayPal president who later served as Facebook's vice president of messaging products — spoke to Yahoo Finance's editor-in-chief, Andy Serwer, as part of a wide-ranging conversation for Yahoo Finance's weekly series, Influencers with Andy Serwer.
‘You'll have interoperability’
Novi is being launched in conjunction with the launch of Diem, a pending cryptocurrency project from Facebook that initially became known to the public in 2018. The project, originally called Libra, faced a number of setbacks, and in 2019 financial giants like Mastercard and Visa abandoned the project.
Rebranded Diem, the project now operates as an independent association but retains close ties to Facebook and has Marcus on its board of directors. With Novi, Marcus hopes to leverage Facebook's advantages in the digital wallet space.
Currently, Marcus said, digital wallets can't communicate with one another. Imagine a world where somebody using Gmail couldn't send an email to a person using Yahoo Mail, he postulated. “That's true for money in wallets today,” he said.
With Novi, he said, “You'll have interoperability."
The idea is that Novi — a standalone app that will also plug into Facebook's products — will be able to convert your local currency into cryptocurrency, and vice versa. "You can use your local currency to purchase Diem," Novi's FAQ said, "and also convert Diem back to your local currency when you want to withdraw."
Facebook is even building out "local cash out points" around the world so customers without bank accounts can convert their Diem coins into the local currency.
'Your financial data is not going to be commingled with your social data’
In essence, Facebook is trying to leverage its massive scale and built-in advantages while avoiding some of the baggage the company has built up over the years over user privacy and targeted ads.
“I want to be super clear on this,” Marcus says. “No data that will be used in Novi can or will be used for ad targeting, or for any purposes around the ad model ... Your financial data is not going to be commingled with your social data.”
Facebook Financial also had stops and starts that may give some potential users pause. Diem was initially launched under the name Libra and immediately drew the attention of regulators and watchdogs. And after CEO Mark Zuckerberg endured a grilling in Washington over the cryptocurrency, the company pivoted the coin’s mission, scope, and even its name. It was rebranded as Diem in December 2020.
Novi’s website notes that it used to be called calibra.
But Marcus thinks Diem and Novi are almost ready for primetime, with a planned rollout beginning later this year and going into 2022. “We want to be very deliberate in the way that we scale the product,” he says.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.