New-age money

I remember well when credit cards were introduced. The ability to buy products and services well beyond one's means and pay back in staggered instalments changed the face of consumerism. Buy now, pay later, and of course, with the interest that was levied upon all transactions. Credit cards, however, didn't spread their user base as rapidly as in the initial years. Reports suggest that compared to 800 million debit card users, only 48 million use credit cards in India today; a slower than expected growth achieved in thirty years since its introduction in the country. Online transactions, payment wallets and others, have populated the market since then. E-commerce and payments start-ups are now giving credit cards a new lease of life by partnering with banks to introduce a new kind of credit card. Paytm-Citi Bank, Ola-SBI Cards, and Amazon-ICICI Bank are already functional, with several similar players prepping for entry. With spending behaviour and choices undergoing constant overhaul, Facebook's announcement of its cryptocurrency, Libra, this week is set to revolutionise this buying behaviour of consumers even further.

Cryptocurrency first came in the news a decade ago with 'Bitcoin' that allowed its users to transfer value through encrypted digital ledgers in the virtual world. This 'avante garde' idea predictably ran into regulatory hurdles and in India, it's not recognised so far. Several kinds of cryptocurrencies have been born in the last ten years but what makes Libra a game-changer is the company backing it. With Facebook venturing into this space, the popularisation of cryptocurrency is inevitable. With almost a billion plus consumer base around the world and add to that the slew of reputed partners that Facebook has already onboarded: Mastercard, Paypal, Uber, and Vodafone among 24 others—Facebook stands to become the largest player in this market in 2020.

Facebook's proposition is to allow the transaction of its digital coin on its messaging apps–Facebook Messenger and WhatsApp—with a view to allowing even unbanked masses to use Libra. For this to become a reality, Facebook will have to depend on emerging economies such as India to ensure high number of users. A veritable roadblock to Libra would be regulations such as the ones in India that forbid trading in bitcoins and other cryptocurrencies.

Security and privacy concerns are yet other important issues that are bound to be raised. Facebook has been in the eye of the storm over its inability to control unsavoury content on its platform. The social networking site has also been accused of allowing itself to be used for political and electoral gains. It will be interesting to see how it addresses security threats and chances of cyber hacking while ensuring the safety of customer data and privacy.

Most significantly, proliferation of cryptocurrencies is an oblique attempt to create a parallel banking order bereft of the control of government policies and central banks. Will it benefit society in general or create unforeseen volatility in money markets, is yet another salient thought that needs to be addressed. By opening up the money market and introducing new ways of transactions, do we also expose the final consumer to greater vagaries and instabilities? Without government role and intervention, final protection of the customer will not be possible. As far as India is concerned, it is time for policymakers to don the thinking cap. A blanket ban on bitcoins and other kinds of cryptocurrencies may not be the best decision. The Indian government awoke to the need for e-commerce regulations long after the market had boomed. It is time now to work proactively rather than in retrospect, to ensure that we keep pace with the times while providing protection to people's interests and their hard-earned money.

(The writer is a journalist and media entrepreneur. The views expressed are strictly personal)