Global Outage Further Undermines Facebook’s Fintech Ambitions
- Lending , Payments , Banking , Financial
- 13.10.2021 10:30 am
Facebook-owned platforms’ global outage last week hinders its plans to launch fintech services.
How we got here: The outage—which lasted more than 6 hours across Facebook, WhatsApp, and Instagram—left 3.5 billion global users and businesses disconnected.
- In its wake, some influencers and small businesses lost as much as $5,000 in sales, and plan to reduce their reliance on Facebook’s platforms to advertise and sell products going forward.
- The outage was badly timed for and may have a lasting impact on Facebook’s plans to facilitate its users’ access to financial services.
- These plans include its August 2020 launch of F2, a new division to oversee all its payments projects, like the stablecoin Diem. And this July, it made Facebook Pay available on third-party platforms, starting with Shopify.
The impact: The latest global outage exacerbates two of Facebook’s challenges: its tarnished reputation and regulatory pressures.
- Reputation. US households trust banks far more than Big Tech for handling their personal data, per a Bank for International Settlements survey from June. The controversies surrounding leaks and testimony from former product-manager-turned-whistleblower Frances Haugen, combined with the recent outage, will only widen this trust gap. This is particularly problematic for Facebook’s fintech solutions—financial data is exceptionally sensitive.
- Regulation. The outage revealed that all Facebook products run on a single system. Regulators may find this particularly troublesome, since more than 200 million businesses use Facebook platforms for their operations. This summer, the US House antitrust subcommittee introduced five bills aimed at curtailing Big Tech’s dominance. The latest outage may encourage further regulatory restrictions to mitigate greater financial risk.
Bottom line: In recent years, it’s become conventional wisdom that Big Techs will fundamentally disrupt finance and market players. Capgemini found a growing share of consumers would be willing to access insurance and wealth management services from such platforms, for example.
But the Facebook outage underscores that, for the time being, it still lacks the infrastructure, regulatory oversight, and even sufficient know-how to fully take on banks and fintechs at their own game. This also may be the case for its peers, as seen with Google recently axing its Plex bank accounts.