According to data compiled by The World Bank, only 62% of the world’s adult population has a bank or other financial account, meaning 2 billion people worldwide do not have accounts.
Here is why the World Bank says financial inclusion matters -
Financial inclusion has been broadly recognized as critical in reducing poverty and achieving inclusive economic growth. Financial inclusion is not an end in itself, but a means to an end — there is growing evidence that it has substantial benefits for individuals. Studies show that when people participate in the financial system, they are better able to start and expand businesses, invest in education, manage risk, and absorb financial shocks. Access to accounts and to savings and payment mechanisms increases savings, empowers women, and boosts productive investment and consumption. Access to credit also has positive effects on consumption — as well as on employment status and income and on some aspects of mental health and outlook. The benefits go beyond individuals. Greater access to financial services for both individuals and firms may help reduce income inequality and accelerate economic growth.
Furthermore, there are some real challenges to providing this financial inclusions, especially in emerging markets -
Many people lack access to financial services in the sense that these services have prohibitive costs or that there are barriers to their use, such as regulations requiring onerous paperwork, travel distance, legal hurdles, or other market failures.
We envision a future where the Hydrogen ecosystem — globally scalable APIs mixed with decentralized blockchain — can help to uplift a large percentage of the unbanked. Let’s examine.
Prohibitive Costs
Did you know that multiple studies have shown that it costs over $1 (per minute in some cases) every time there is a call to a financial services call center? This is one of the major reasons there are high minimum balances, strict account opening requirements, and high fees for most financial services in developing markets. Balances less than $100 become unprofitable for the average financial institution. Cloud based APIs and blockchain can solve this.
By decentralizing an application, data, support, and analytics can instantly be provided to customers. Gone are call centers — replaced with intelligent FAQ, blockchain trained AI, and mobile text alerts.
Onerous Paperwork
The majority of the world’s financial institutions cannot onboard customers digitally. This is mostly because they lack the digital infrastructure and APIs to do so, but also because of high costs of performing KYC, legacy document signing frameworks, and security concerns when not performing the actions in person in front of an agent.
Because of this, hundreds of millions of people in rural areas are shut out of the financial system. They have to travel long distances to get access to the financial institutions.
Cloud APIs and public blockchain can bring this inclusion to them. On the Hydrogen platform, any financial institution worldwide can plug in digital onboarding for banking, savings, investing, insurance, and more. How? Because we leverage the power of U.S. cloud infrastructure, within local regulatory frameworks, that can be deployed in over 100 countries. Any language, any currency, any institution supported.
What if any person around the world can have an immutable fingerprint stored on the blockchain and accessed through any API based financial platform? They could use this fingerprint to open accounts, sign documents, and more. No more KYC and AML costs, no more paperwork. It won’t matter where in the world they are, as long as they have access to their phone and the financial institution is using REST APIs, they are set.
We are in the midst of a second digital revolution. It is time for financial services to be taken out of the dark ages and into the light.
