Mushrooming India growth potential driver for Facebook’s Libra

Facebook Inc.’s new cryptocurrency system Libra will be counting on continued explosive growth from emerging markets and especially India to succeed, according to strategists with Jefferies Financial Group Inc.

While Facebook’s user growth in North America and Europe has slowed, the social media giant’s base in India has doubled since 2015 to about 310 million people -- and is forecast to balloon to around 440 million by 2023, according to a June 19 report from strategists led by Sean Darby.

“It is the company’s growth in India that is eye-catching,” Darby said in the report. “The fact that developed markets may have become ‘saturated’ has prompted the company to look at emerging markets where it can possibly mix payments and advertising” as personified by Tencent Holdings Ltd.’s social platform WeChat in China.

Facebook is taking advantage of low penetration rates in emerging markets, where it expects 90% of its growth to come from Southeast Asia, Middle East North Africa and Latin America, he said.

The Libra crypto project, which may launch as soon as next year, includes payment giants Visa Inc., Mastercard Inc. and PayPal Holdings Inc. as partners. It’s designed as a stablecoin, a digital asset backed by low-volatility securities to minimize price fluctuations, and presents an opportunity for Facebook to generate new sources of revenue from its massive existing customer base. It’s already facing skepticism and criticism from politicians raising privacy and security concerns.

India certainly appears ripe for an “S curve”-style payments system boom, with the value of transactions already jumping more than 50-fold in the past two years to ₹143 trillion ($2.05 trillion), Darby said.

It’s no surprise then that two of Facebook’s biggest competitors, Alphabet Inc. and Amazon.com Inc., are also setting up shop in the Indian fintech space, Darby said.

“Of course, this is the area that Facebook is setting out to grow through the development of Libra,” he said.