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Facebook’s Cryptocurrency Offering to Get Backing From Booking Holdings

Dennis Schaal
Facebook’s Cryptocurrency Offering to Get Backing From Booking Holdings

Online travel agencies aren’t alone among travel industry, and other, businesses in resenting credit card fees.

That may be one motivation, along with respecting the power of Facebook in travel advertising, that Booking Holdings is reportedly getting in on the ground floor of a Facebook effort, slated to be announced next week, to create a cryptocurrency called Libra. [Here’s an update on the Libra Association and Facebook announcements.]

The Wall Street Journal reported Thursday that Booking.com and Uber, along with a variety of financial services and e-commerce companies, including MasterCard, Visa and Paypal, will be part of a consortium backing Libra. Facebook is trying to raise $1 billion to fund the cryptocurrency effort, and each of the backers would kick in around $10 million, according to the report.

The concept behind Libra is that consumers would use digital currency to make payments around the Internet, including on Facebook.

Skift Research estimated that Booking Holdings paid roughly $200 million and Expedia Group spent around $500 million in credit card fees in 2018, based on about a 1 percent credit card fee.

The move by Booking to get involved with the Facebook digital currency effort fits in well with its strategic push to develop or use alternative payment systems. In its 10-K annual report published earlier this year, Booking wrote:

“We believe that another critical component to our future success will be our ability to offer alternative payment solutions to consumers even when those payment solutions may not be accepted by the travel service provider or restaurant. Alternate payment providers such as Alipay, Paytm and WeChat Pay operate closed-loop payments systems with direct connections to both consumers and merchants.

“In many markets, particularly in Asia where credit cards are not readily available and/or e-commerce is largely carried out through mobile devices, these and other emerging alternate payment methods are the exclusive or preferred means of payment for many consumers. Therefore, if we are unable to offer consumers their preferred method of payment by integrating new or emerging payment methods into our platforms, we may not be able to effectively offer our services to these consumers, which would limit our growth opportunities in these markets and our business and results of operations could be harmed.”

A longer list of the reported backers of the effort can be found here in a story from The Block.

The idea behind cryptocurrency is that it would bypass global financial systems and democratize payments with blockchains as the foundation. Digital currencies have been wildly volatile in recent years, and to get around that barrier the value of Facebook’s Libra would be tied to a variety of conventional currencies, according to The Block.

So why would MasterCard or Visa want to be part of Facebook’s effort to cut them out of transactions. Credit card companies, according to published reports, would want to back the Facebook digital currency effort in order to learn from it. They perceive currencies such as bitcoin as posing a threat to their businesses, in theory, at least.

Booking Holdings declined to comment.

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