The Power of the Shared Value Ecosystem - Libra

Revolutions: The future of global banking is here. 

For the longest time, a siloed strategy and approach to banking has been the norm. And just as the concept of revolutions - industrial, technology etc. (I remember Bob's speech on this in June 2016), one revolution takes human generations from one space to the next. I can't put it as he did - coz clearly I'm not as experienced as he was. BUT, the point remains - you can't fight revolutions, not for long. They consume you (whether an individual, incumbent multi-national, government etc.).

At the moment I love love love the ongoing conversations on Libra cryptocurrency, Calibra as a sub of Facebook, Libra Association - a non-profit entity to apparently monitor Libra, push back by Government regulators and Presidents (Trump's viral tweet). Haven't heard a word from Africa yet though - probably the industry players think this is a far from getting to us. A long serving mistake around revolutions.

The Poison of Siloed Business Models - #OpenBanking

Siloed strategies are losing, and struggling more by the day. Kenya for instance, is an example of a country with a population that's super multi-banked. But to date, bank A expects you to print your bank B statements, have them officially stamped then WALK back to bank A so that your creditworthiness during a loan application can score higher. Ridiculous! Lubbish. We still don't understand the concept of #OpenBanking and OpenAPIs. All in the name of "protecting my customer deyra ?? (data)". It sounds really cool and the right thing to do, but the revolution is way past this backwards policy. Worse still, at least the banking industry has CRBs that consolidate data on creditworthiness and all - Insurance industry is yet to get there. You wonder why insurance fraud is at an all time high - with cartels right from claimants, assessors, police traffic units when it comes to incident abstracts, garages, claims settlement etc. Decentralised and siloed data systems and customer behaviour is killing you - just because we are yet to understand the value of a shared ecosystem in Kenya.

According to HBR article on the Ecosystem of Shared Value, shared value results from policies and practices that contribute to competitive advantage while strengthening the communities in which a company operates. Companies can create shared value in three ways: by reconceiving products and markets, redefining productivity in the value chain, and strengthening local clusters. All three require a sufficiently robust market ecosystem - which Facebook has built over years, hence my thought process below. 

Context - Facebook's Libra

Libra - Facebook’s digital currency. Basically a new type of cryptocurrency in the market. 

Calibra - a new subsidiary of Facebook launching to build financial services and software on top of Libra blockchain. In short, Facebook’s transfers and payments unit. Calibra’s Libra currency will likely be the first cryptocurrency wallet that hundreds of millions of people will have access to, by nature of being bundled with Facebook’s massive ecosystem

Facebook forms a sub - Calibra, and uses it to make money off Libra (a digital currency it says it doesn’t want to control despite having created it ??). Calibra’s tight integration with FB’s user base globally makes it the strongest payments company ever - forget Mastercard and Visa kids. Or our Okonkwo M-Pesa ?????♂? - yeap I said it. Know when to draw the line in praises. Zuckerberg didn’t just come in Kenya to eat fish and take selfies - now you know. 

Libra Association - HQ’d in Switzerland (you know why), has been formed by FB itself, to deal with the regulation headache starting with the US. Remember Trump’s recent tweet? Yeap - FB creates a non-profit association to oversee Libra as a cryptocurrency, and then becomes its member (lolest) and have equal voting power the other partners as Facebook’s official representative: Uber, Lyft, eBay, and PayPal, along with several other tech companies, financial service providers, venture capitalists, and fellow nonprofits. Boom - Facebook can then say it does not SOLELY control the currency or the network by itself. Remember the “Let’s break Facebook" recent vibe? Intelligently addressed. Reminds me of how recently CBK (the banking regulator) was advertising a product - Stawi by some local banks, making the CBK both a regulator (of its own service - lol) and a competitor to the rest of the banks offering Stawi like product.

Access channels - Calibra digital wallet will be exposed through FB Messenger and WhatsApp (This kills my earlier prediction of a global WhatsApp banking wallet as we have WeChat in China etc.). In short, its not WhatsApp that will then compete with WeChat, its Facebook itself. Calibra will also exist as an iOS and Android App for non-FB users like myself.

Calibra’s value proposition? - Holds your money 'securely' for free & allows transfers globally at the lowest cost ever relative to existing payments and transfer service providers. KYC Security based on signing up for Calibra using a Govt issued ID. 

Product roadmap: With the massive data, credit/lending is definitely in the pipeline. Probably the most robust credit scoring engine ever - including social scoring etc. With more data points, of course lowers the NPLs, lower than any bank's loan book today. Basically Facebook Bank - the largest bank ever in history. I’m sure they’ll use the politically correct and cool terms such as Global Financial Inclusion, Catering for the base of the pyramid, Social enterprise, Financial Wellness for the underserved blah blah blah. Capitalism.

So what!?

I don’t know how you stop such a movement - whether you are

1. A Bank: This is the mother of all banks with massive data that any other single bank can't and will never have if the current strategies are anything to go by. Should banks think of plugging in as opposed to competing with it? Locally, Banks fought M-Pesa for so long, today we (shamelessly) ride on the ecosystem M-Pesa has created, at the core of the country's GDP. I mean, its not longer an innovation to tell a user that your channel allows them to do M-Pesa B2B, C2B and B2C. I foresee the same trend, local banks across the globe will simply have to accept and plug in to Calibra's Libra. Meaning banks will have fully incorporated Cryptocurrency in their space -knowingly or unknowingly??. Will this make them member associates of Libra Association? I don't know - probably. Hence (2) below.
2. Government Regulator (s). Worst time to be a financial regulator in human history. How do you stop a player that's not even a bank, forms a banking entity that has a totally different business, data, GTM and revenue model outside your scope of regulation, USES (yes they are being used) other smaller entities (Libra Association members) to sign up on the model such that you can't say they are solely controlling the ecosystem, then gets to REDEFINE how it will be regulated (lol, I love technology). So similar to El Chapo building his own prison with his own guards and rules on how he will be jailed by the Mexican government. Think of Facebook as the El Chapo of tech. Do I know how local regulators will regulate bank's that consider plugging in to the Libra ecosystem? Nope - but that's gonna be an interesting watch.
3. Fintech - sorry guys, your ancestor is awake. This is unprecedented. Strategic alignments to collaborate with the revolution are key - coz its coming. Think of Fintech digital lenders locally, the usual culprits that make the good noise and create the centre of focus for events (which I enjoy anyway) - how do you continue to offer lending services for example when your KYC data is a 0.000000001% of what FB's Calibra's Instant Decisioning system on credit/loans of sort will have? What becomes your new USP? As you fight that battle, CBK locally is already on your case (of course being pushed by banks). Interestingly, CBK governor says (as of yesterday 16 June 2019) that digital lenders account for less than 1% of country's loan book ??????. Like, let's allow a margin of error - and say 97% of all current loans issued in Kenya are by the banks. Data is not your uncle, and it never lies. I wonder why the noise sometimes on "ooh Fintechs are a threat to the banks". I think their strategy is what's the threat - but with about 400 digital lenders accounting for less than 3% of country's loan book - makes you open your eyes. I don't know what the future of Fintechs is - whether you're playing in lending, transfers, payments, bills and utilities etc - revolutions have a way of dictating new ground rules, and simply consuming others.
4. (IMTs) International Money Transfer service providers: One sentence. You are staring at a Kodak moment.
5. End Users/Customers: Biggest winners of course - global products that define customer experience in an unprecedented way. When the giants fight, the non-issues benefit the most. BUT, data privacy and all will only get messy as you are required to intentionally submit more data about yourself for a better service on Calibra. Your choice!

As I always say, you only find out who has been swimming naked when the tide goes out. Counter-check if your costume is still on brah - whoever you are. Let the games begin!