Facebook's Digital Currency May Flourish Where Banks Don't

Europeans and Americans have their Visa and Mastercards. For everyone else, here comes ... Libra?

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Facebook’s new Libra digital currency is aimed at a huge potential market for financial services — the entire developing world, with billions of people in areas such as India and Sub-Saharan Africa, where financial services are often less sophisticated and many people don’t use traditional banking accounts. Whether or not these billions will want to make the switch is anyone’s guess.

The U.S., Europe and most developed economies already have large, efficient payment systems. These allow people to buy and sell goods in real time and send money personto-person through services like Zelle, PayPal and Venmo. That’s why the companies that joined Facebook’s Libra association, as well as nonprofits involved with similar projects, say Libra’s potential lies elsewhere.

In developing countries, many tens of millions still live far from a bank or money transfer center, or currently use a currency prone to inflation or volatility. Libra could address this issue by providing a universal, stable currency that is easily transferrable between persons or businesses without involving setting up an entire payment infrastructure. It also potentially could work at a lower cost.

In the last decade, citizens of developing countries have widely adopted cellphones as a way to store money, sending text messagebased payments either to businesses or persons. It’s been a broadly heralded development among policymakers and nonprofits focused on poverty because bank accounts are hard to come by or are too expensive.