Let’s start with the intrigue.
Which is that right in the middle of writing this app review, I see on twitter that the US Senate published an open letter to Facebook asking them to take this app off the market.
Their reasons can be summed up as follows: “Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society….Facebook’s decision to pursue a digital currency and payments network is just one more example of the company moving fast and breaking things.”
The letter cites the risks of stablecoins to financial stability, which are currently being evaluated by regulators and it specifically highlights the risks of cryptocurrency lending, which is fueled by stablecoins.
If I had to guess, I would say Senators that signed onto this letter never actually downloaded or used Novi. If they had, they would have seen that its a fairly run-of-the-mill P2P payments app. No yield or lending features whatsoever.
Beyond that, Novi uses PAX dollar for their payment rails. Which, to me indicates that Facebook has abandoned previous plans to build their own stablecoin (RIP Libra/ Diem).
I personally don’t want to see Facebook become a global bank that gains control over their massive user base’s finances. But the implication that Novi is anything close to that is pretty laughable.
Considering what Facebook’s crypto ambitions looked like back in 2018 when they announced the Libra project, we should all be relieved that this is all they have been able to come up with in over three years of development.
So what is Novi?
TLDR; It’s a super secure custodial payments app primarily geared toward P2P payments. Very similar to Venmo in terms of UX but intends to work across borders (only serving the US and Guatemala for now).
Mmm, value props (image created by the author).
I personally love the on boarding flow. Not sure it’s going to age well, but I appreciate the way it takes me through the different pieces of information and lets me digest it in a way I probably would not have done otherwise.
I also really like how they have ‘opt in to notifications’ as a way to kill time while you wait for your account to set up.
Novi onboarding conversational UI.
PAX dollar
When you add money to Novi, it gets converted to USDP, which I didn’t recognize right away because PAX dollar recently rebranded itself to “USDP.”
Kinda makes it sound more legit, right?
USDP is indeed legit. It may in fact be the most above board stablecoin. Every USDP is backed one-to-one by a dollar in an NY bank account that is subject to regulatory oversight by the New York State Department of Financial Services. The same department that brought us the BitLicense back in 2014.
Novi uses Coinbase as it’s custody service
Pretty hard to get up in arms about Facebook becoming a global bank and controlling our money when it uses a publicly traded US company for custody.
My understanding is that the USDP is held in a Coinbase account which is owned by Facebook, similar to the way over 9000 other large business entities use Coinbase to custody their coins.
Much better, right?
Novi strengths
The UX is incredibly smooth and you are pretty much unaware that this is a crypto app at all (a true feat of product design)
Pay no fees when you send or receive funds from one Novi account to another
Security first — they verify all their users at signup with no skip
Anti-fraud protections: if your funds get stolen, you get them back
Easy transfers to and from your bank
I get the sense that there will be a place for this app in the ecosystem, particularly among crypto nubies. The fraud protection promise alone will definitely appeal to a lot of folks, as will the absence of any crypto oddities like wallet addresses or pneumonic phrases.
Novi weaknesses
No bitcoin (reasonable people may disagree)
Doesn’t store or facilitate payments with any other cryptos
Doesn’t integrate with other Facebook products in any way
Doesn’t facilitate payments to merchants (even ones set up to accept crypto payments)
Only works in the US and Guatemala
Final thoughts
Novi proves that Facebook can bring a crypto app to market, which is something. But as of now, I have no use for this app.
It works just like Venmo and while it technically uses crypto rails, it doesn’t offer any of the benefits of doing so (unless you have a friend in Guatemala).
The controversy will probably give it a boost in downloads. When I read the Senate’s open letter, I had to go back and look at the app again to double check that I hadn’t overlooked something big.
Sadly, the letter seems motivated not so much by the development of any boundary pushing features, but by the willingness of certain politicians to take a swing at Facebook any chance they get.
Novi is the product of what I imagine was a long and frustrating development cycle, plagued by fits and starts, internal disagreements over ambition and scope, and fraught with the confusion of regularity uncertainty.
Our fears of a Facebook crypto network that could leverage its massive user base were well founded at one point, but I think those days are over.