LONDON — Farfetch has long had its eyes on blockchain and its potential to disrupt the luxury industry. Now it’s joining Facebook’s new blockchain initiative that could completely transform the way transactions are made.
The social network is developing a cryptocurrency called Libra Blockchain, which is designed to make sending money as easy as sending a photo or text — users will be able to convert money into Libra and send it via apps like WhatsApp or Facebook Messenger.
Libra, which is set to launch to the public in the first half of 2020, will be operated by Libra Association of which Farfetch is a founding member, alongside some of the biggest names in technology and finance, including Mastercard, PayPal, eBay, Lyft, Spotify Technology and Vodafone Group. Farfetch is the only corporation from within the luxury industry taking part.
Stephanie Phair, Farfetch’s chief strategy officer, said that the company was drawn to the scalability of the new venture and the group of partners that are already on board.
“We felt that Facebook had a lot of the foundation right in order to succeed as a blockchain platform. They are building something that is stable and scalable with partners that maintain the infrastructure. As a technology platform, we felt that given the amount of members and the approach behind this, it was the right sort of partnership to engage with. Every one of our partners is a leading member of their industry and they see us as a leading tech firm in the fashion industry,” said Phair in an interview.
While Libra has potential to shake up the financial industry as a whole, facilitating transactions by those who might not even have access to bank accounts, when it comes to luxury fashion the real appeal is the creation of “frictionless e-commerce.”
“The position behind the Libra association is to provide a stable currency globally that can give financial inclusion and can allow millions and millions of unbanked people to access it,” said Phair. “We support and absolutely see the value in this, but it’s probably not directly related to the industry that Farfetch operates in which is a luxury industry where purchases are more considered and at a higher price point. In our case one positive application could be around commerce: Most of our sales are beyond borders, we are always looking at payment systems and new technologies and this felt like the first application that made sense to us. This could be an interesting way to transact across borders with a wallet sort of in your phone at all times.”
While the luxury sector hasn’t always been the fastest adopter of technological developments, Phair thinks that when it comes to blockchain brands and other retail players will have to jump on board given the consumer demand that’s bound to arise.
“Technology moves fast and the fashion industry needs to adapt to it faster and faster. The industry is potentially more consumers-led than ever and it’s the consumer who’s driving this adoption. Brands and industry players need to adapt to that because increasingly, you have to be where your consumer is. The adoption of this crypto currency system could be because there is a demand from consumers [to minimize] transaction fees,” she explained.
Data-protection is another big point of consideration when it comes to cryptocurrency and Facebook, but by involving other corporations in the initiative via the Libra Association, the social network seems to have laid out the right foundations to enable secure transactions.
“This is absolutely top-of-the-mind for consumers and therefore by us. Facebook is putting a lot of money and itself behind getting the technology off the ground. However, the governance that has been set with the association means that Facebook will have no more no less power, voting rights, ability to access data than any of the other partners that are a part of Libra. That’s the way in which a blockchain consortium should be built and it gave us confidence that this was the right thing to do for our consumers,” said Phair, adding that the Libra association will become open for any corporation to join in the future, so data-protection will be in everyone’s interest.
At the moment the number of partners will be decided by the current founding members, who will all work towards the “technical, architectural, and operational development of the Libra Association.”
“Building on this announcement, we will be joining up with all the partners and setting up the governance. We are sending delegates to the headquarters in Geneva to understand how the launches at early 2020 will work. In terms of technical support to the technology, we will start to see how we can apply it to our customers,” added Phair.
Farfetch chief executive officer and cochair Jose Neves added that there is a lot of further potential to use blockchain to solve a number of fashion industry issues and the company will be spearheading a broader blockchain strategy, beyond the Libra initiative.
“We believe blockchain will benefit the luxury industry by improving IP protection, transparency in the product lifecycle and — as in the case of Libra — enable global frictionless e-commerce. As a founding member we will be able to learn from our participation and accelerate our other blockchain projects,” said Neves.
For Phair, supply chain and authentication are two of the biggest areas blockchain can penetrate and provide solutions.
“If you can track products back to its manufacturers more accurately, you can really start to make better and more ethical choices,” she said. “When you look at authentication, it is a huge concern in the fashion industry especially towards counterfeits but there is also so much below the surface. Counterfeits create revenue loss for the brand, but more importantly a lot of the money that goes into funding counterfeiting is going into human trafficking and organized crime. If you can apply technology to start to take value out of the counterfeit industry, it becomes a useful application to do things for good. There are also so many applications that we might not even know about and that is the beauty of it. There are so many different layers we can build applications on top of applications.”