Bitcoin is something special for every person: commodity, community technology, investment or business opportunity. But there’s another important possibility that doesn’t get much attention. Cryptocurrencies can help to fight financial inequality and to bring financial services to people without access to a bank.
Bitcoin and other cryptocurrencies will play a large role in financial inclusion, even more than all microfinance institutions. Cryptocurrencies can bring a paradigm shift for the unbanked and bring forth a lot of technological, political and economic change.
The distributed networks that Bitcoin relies on provide a financial infrastructure, which is always online and accessible and because of its decentralized nature, cryptocurrencies can bypass any kind of state control and bring opportunity to the users.
Anyone who is unbanked can create a bitcoin wallet and transfer money internationally via internet or even use the recent bitcoin debit cards, which work like any VISA card but with the advantage of having much lower fees.
Also crowdfunding and investment with cryptocurrencies has the potential to fund the future of innovation and entrepreneurship in developing global markets, more significantly so in countries with failing financial infrastructures and weak local currency.
Venezuela is a great current example of how cryptocurrency helping people to get access to essential goods that they wouldn’t have possibility to otherwise, because of high inflation and devaluation of the local currency.
Let’s take a look how Bitcoin could help the unbanked people.
How many people remain unbanked and don’t have access to a bank?
Some people require some nearby branches or a safe way to travel to them. Others may require the necessary ID, cannot afford the costs or aren’t aware of the benefits. Just look at the recent figures from the World Bank: 2 billion people remain unbanked worldwide.
The World Bank estimates that the third part of these 2 billion people without access to the modern financial system are living in Sub-Saharan Africa. Large numbers of people are unable to use banks to meet their day to day financial needs. It means that they don’t have access to the convenience, to security and to interest that banks provide.
Why it’s so important to have access to financial services?
Financial services allow many ways of improving quality of life. Loans and mortgages make it possible to start a business or buy a home. Deposits are a safe way of saving for a large purchase or thinking ahead. It even limits the type of work people can do.
Better access to banking, economic development and higher employment rate will provide those people with new possibilities. In the countries with developing economies, large banks do not want to extend credit to the underbanked. Even when they do, they charge very high interest rates to offset the risk.
For a time, micro finance institutions provided a way for the underbanked to access much-needed credit, but in recent years, large banks have begun to participate in micro financing schemes. In the process, the interest charged on micro finance loans has increased significantly and become a major pain point for the unbanked.
Why is crypto the best solution?
Cryptocurrency is the perfect way to bring financial services to everyone, regardless of location or income. For those without access to good local banks, cryptocurrencies offer a solution.
With a smartphone or laptop and internet connection, anyone can start using Bitcoin to send and receive money. Not only is it fast and cheap, it’s also more secure than mobile banking. The technology is flexible and the barriers of entry are low.
Blockchain technology has the potential to help the unbanked by allowing them to create their own financial alternatives in an efficient, transparent and scalable manner. One of the biggest challenges banks face when trying to serve the unbanked is that many of them do not have clear identifying information, making it difficult to implement KYC practices.
Bitcoin appeared to be the front runner and ideal candidate for cross-border transactions, especially remittance payments. Because cross-border payments are very expensive.
For many people, the cost to send money into Africa through banks and wire services can be a challenge, with transaction fees usually in the range of at least 10 percent. Intra-African money transfer is even more expensive and the cost can rise to as high 17 percent. The Bitcoin average transaction fee costs only a few cents.
As cryptocurrency and blockchain technology mature, and transaction costs are reduced, using cryptocurrency as a means of remittance may become a reality for many citizens residing in Sub-Saharan Africa. Further, cryptocurrency and blockchain technology are gaining acceptance among African youth who desire to not only use the technology but find ways to learn and innovate upon it. With the demand for cryptocurrency on the rise universally, and a growing base of millennials understanding the underpinnings of the technology, it is foreseeable that in the near future, cryptocurrency could very well be a solution for the unbanked in Sub-Saharan Africa.
Anyone will be able to store their wealth securely without fear of it being stolen or inflated away.
Cryptocurrencies plus the smartphone could be the best way to bring financial inclusion to various regions around the world.
A user controlled wallet on a cell phone may turn out to be an effective way to improving lives. With Blockchain, individuals can receive a digital identity for use in their banking. Property rights, long a pain point for many low-income individuals, can also be moved onto the Blockchain, allowing them to enter formal information networks and even leverage their property as collateral. And by making remittances painless and efficient, Blockchain could allow low-income individuals in different countries to save and lend together.
Blockchain provides a secure, scalable way to serve the needs of individuals, and a number of technology companies are leveraging it to usher in a world in which everyone has access to the savings and credit that is an essential building block for economic growth.
Don’t miss the latest news of Bank4YOU Group making its best on implementation of Blockchain technologies for the unbanked: