The future of banking
Today the banking needs of 1.7 billion adults remain unmet. The reasons for this go beyond not having a bank account, cash remains prevalent as more than 400 million unbanked adults receive their income in cash. The costs, travel distance, and paperwork involved with creating an account also make it difficult for them.
The problem is more pronounced in developing countries, where banks are struggling to reach the unbanked due to high operating costs. In Nigeria, a number of bank branches closed due to falling profits in 2015. In Bangladesh, 80% of the population is underbanked, which translates into 130M people not being able to access formal financial services. Many Bangladeshi in rural areas do not even think of saving money and putting up a bank account. As long as these barriers exist, economic growth will not translate into financial inclusion.
The key to the future
There are many solutions to banking the unbanked, from infrastructure development and business growth in unbanked communities to mobile wallets and cashless ecosystems like GMobi’s Reach Pay or Alibaba’s AliPay.
One solution that has been gaining traction in the industry is decentralized banking. It has become attractive to many organizations addressing the issues of the unbanked because of the huge potential decentralization has to decrease overall costs while also increasing security and transparency. With many people unbanked precisely due to financial barriers, this could be the answer.
Another approach making the rounds is open banking. Recently implemented in the UK at the start of this year, open banking allows third-parties, usually startups, to get standardized access to data from banks. These third-parties are properly registered and the customers agree to share their data, making it a lot easier for startups to create financial products and services that will increase innovation and competition in the sector. More than helping the industry, it also scales up the accessibility of financial services, allowing users to seamlessly connect to multiple banks and platforms.
The technology that ties decentralized and open banking together is the blockchain. With the blockchain accelerating the potential to realize the benefits of these approaches to banking, the industry is touting the blockchain as the key to a future where banking is more accessible. Open and decentralized banking is enabling companies like HSBC to work with startups like R3 to put the blockchain to the test. Projects like WeTrust, Kiva, and OPTIX are working on blockchain-based solutions to address specific issues in money management, lending, and personal finance.
“Universal Banking Model”
Like many companies and startups, TraXion is using the blockchain technology to bank the unbanked. However, instead of tackling a single problem, our approach is to build a blockchain-based platform that can cater to the various needs of the unbanked — in the words of our CEO Ann Cuisia, “a universal banking model.”
The goal is to make existing online services more accessible through blockchain technology. For the unbanked, this means being able to get a loan, send remittance, or cover medical expenses just with their smartphone or walking over to their local neighborhood store. This is “universal”: decentralizing these services to make them within reach for anyone who needs them.
Imagine a world where it doesn’t matter if you’re from Nigeria or Bangladesh, from the city or a small town. Regardless if you need to make an insurance claim or collect donations, all you need is a phone and internet connection. This is the kind of world we hope to achieve with this “universal banking model.”
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