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Vodafone’s exit from Facebook’s Libra is the right move

Most of the focus for what this means to cryptocurrency will be on Libra, Facebook, the financial industry and all the regulatory scrutiny the project will invite. For telecom, it points to something else.

Tim McElligott
24 Jan 2020
Vodafone’s exit from Facebook’s Libra is the right move

Vodafone’s exit from Facebook’s Libra is the right move

Vodafone gave it a shot. Motivated by a desire to bring affordable financial services to the world’s poor, the company was a founding member of Facebook’s Libra global cryptocurrency project. This week, Vodafone joined several other founding members in withdrawing from the project. PayPal, Mastercard, Visa, Mercado Pago, eBay, Stripe and Booking Holdings have already exited.

In a statement Vodafone said it can most effectively serve underdeveloped markets by focusing on its own digital payment service: M-Pesa. In May Vodafone and Safaricom announced a joint venture under which Vodafone is acquiring the intellectual property rights to M-Pesa for $13 million.

Reason enough


While Vodafone no doubt has more complex and nuanced reasons for leaving the project, the given reason is good enough. Most of the focus for what this means to cryptocurrency will be on Libra, Facebook, the financial industry and all the regulatory scrutiny the project will invite. For telecom, it points to something else.

Success in the digital, data-driven and ubiquitously connected future will depend on a company’s level of trust. Distancing itself from Facebook is one of the wiser moves a communications service provider (CSP) can make if interested in preserving its reputation in handling customer data.

CSPs are trusted


A 2018 report by the IBM Institute for Business Value research shows that in emerging markets, CSPs are the most trusted organizations by consumers for handling personal data. In mature markets, they rank second only to banks and credit card companies.
But trust is fickle. Once earned, it must be maintained through vigilance and consistency of behavior in handling customer data. IBM said customers often waiver between three primary mindsets: consistently trustful, increasingly suspicious and trustful but worried. These are driven by three trust imperatives: transparency, value exchange and security.

As IBM noted, “CSPs have the luxury of being among the most trusted organizations for personal data security by consumers. But a single security lapse can seriously erode that trust.”

Facebook has already fumbled away its reputation as a trusted partner in keeping personal and corporate data secure. CSPs cannot let that happen if they wish to become bigger players in mobile payment and banking services as Vodafone and others hope to do.

The IBM study also said Consumer trust in sharing personal data with CSPs is actually on the rise in the younger demographics that would be the predominant users of these services. Forty-four percent of those aged 25-44 are comfortable with CSPs while only 33% of those age 45 and older say they are comfortable. CSPs need to guard that reputation with their lives, so to speak.

While CSPs score high in trust overall, they rank highest in emerging countries, where many will be deploying their mobile payment and banking services. M-Pesa, for example, is currently deployed in six African nations. At the bottom in trust for mature economies are social media companies.

The trust factor will serve CSPs well as they move more aggressively into the mobile payment and banking market. Fortune Business Insights puts the transaction value of this market at nearly $6.9 billion by 2026, a 28.7% compound annual growth rate from 2018. CSPs, however, have a long road ahead to become serious players in this market. They are not currently listed in Fortune’s top 10 companies in the mobile payment sector, even though mobile operators have been trying off and on to crack the market for a long time.

In 2008, when I was working at B/OSS magazine, I put Affinity Mobile on the cover, thinking the new MVNO had its finger on something special. Affinity was going to serve the “unbanked” in emerging markets with its mobile banking app.

Shortly after that debut, the company became Trumpet Mobile, which later became Ready Mobile, and the honorable dream of Affinity’s mission faded away – and wound up relegated to its place in this photo: the wheelie bin.
It was not trust that failed Affinity. Perhaps it was simply being too far ahead of its time. But trust can make the difference going forward, so CSPs shouldn’t let it trash their dreams and the real-world need for affordable mobile payment and banking services.