Crypto Can Be the Answer for the Unbanked Population

Crypto Can Be the Answer for the Unbanked Population

The cryptocurrency industry has been born with a single goal – to address the flaws of the conventional financial system. Despite their complexity, some of the best cryptocurrency apps were developed by agile teams exceptionally fast with a short time to market. Millions of people use crypto wallets and exchanges as if they had been around for decades to manage their investments.

However, the most glaring one that hasn’t been addressed for decades is the large number of unbanked individuals around the world. Suppose the cryptocurrency industry wants to prove its worth and show that digital assets can be more than just a speculative investment instrument. In that case, a means of payment for millions of people is the perfect opportunity to do so.

The Unbanked Population and the Failure of the Conventional Financial System

Nowadays, the high number of unbanked population is probably the most significant opportunity and problem, at the same time, within the financial world. The most recent figures show that unbanked individuals stand at 1.7 billion, or approximately 21% of the entire population. 

Global Finance finds that the share of the unbanked population across different regions is as follows: the Middle East and Africa (50%), South and Central America (38%), Eastern Europe (33%), Asia Pacific (24%) and North America (21%).

What is more interesting are the reasons why such a large number of individuals lack access to financial services. Over 30% cite the lack of sufficient funds as the sole reason why they don’t have an account. While the problem of poverty can’t be (and likely won’t be) addressed in the short term, technology can help address some of the other most prevalent reasons. These include the expensive nature of bank accounts and the lack of financial institutions nearby and defi crypto.

These reasons aren’t hard to address at all—just the opposite. However, despite that, the financial industry has been looking in the opposite direction and has refused to tackle them for decades. While this has put a strain on its reputation, it has also opened a massive opportunity for the new kid on the block – the crypto industry.

The Crypto Industry Has a Chance to Impress

Blockchain makes things that seemed impossible a generation ago entirely reasonable and achievable today. Due to this, addressing the unbanked population issue isn’t as complicated as it is often made out to be. There are two reasons for this.

  • Close to 65% (1.1 b) of the unbanked population globally own a mobile device.
  • The majority also are within countries that don’t struggle to ensure an accessible internet connection. 

Besides, governments from emerging markets where most unbanked individuals reside are much more open to disruption and new technologies than most developed markets with strict regulatory frameworks in place.

So why haven’t banks and financial institutions take advantage of these favorable circumstances? In all honesty, the conventional financial industry isn’t interested in addressing the issue since it won’t be able to collect the fees it is used to. Furthermore, it had long been focused on more lucrative aspects of customer service, including wealth management, design of complex financial instruments and more.

Addressing the problem will unleash a horizon of opportunities for the crypto and blockchain industry. 

First, it will open it up to a huge market of hundreds of millions of potential new users. 

Next, it will serve as a trampoline to the much-anticipated mainstream adoption.

One might argue that such efforts will be doomed to fail, considering that many of the unbanked currently struggle to make ends meet and won’t be in real need of a money account. While this is true, financial inclusion is detrimental to enabling the world’s mission to achieve the SDGs. 

Even for purely financial reasons, having an account is beneficial. It can ensure access to all types of services like loans, interest earnings, insurance and most importantly – fund protection from theft and loss. Furthermore, a major part of the low-income population often relies on relatives abroad to send them money. The charges for this type of bank transfer are usually very high. Besides, it is always quicker to take the money out at an ATM, catch a plane, deliver them to your relatives and then get back compared to how long international bank transfers take. 

However, thanks to blockchain, both transfer costs and transaction length can be brought down to a minimum. 

The Change Is Already Happening

Fortunately, crypto ventures are starting to recognize the opportunity and the need to address the problem. There are highly successful projects both on an international and local level.

Private and public projects across countries like Indonesia, the Philippines, Tunisia, Mexico are already making a massive difference to the local unbanked population by granting access to a mobile wallet, digital banking, currency exchange, payment terminal and other types of services.

The thriving decentralized finance industry also comes into play by broadening the scope of the services provided to the unbanked. It helps address one of the most cited reasons for not having a bank account – lack of needed documentation. Today, many projects provide lending and borrowing services without KYC verification requirements or performing credit score analysis.

We Can Do More

Working towards a decentralized financial system underpinned by blockchain and digital assets can bring mutual benefits both to the incumbents in traditional financial markets and the population lacking access to financial services.

Solving the problem with the unbanked population in many countries across the world is often low-hanging fruit. Since the traditional financial system has progressively declined to address it, today, the crypto industry has a huge opportunity to exploit. The biggest companies and the most notable ideas in history have all solved existing problems. Those who help with broader financial inclusion will leave their names in the books.

However, marching towards a future without financial exclusion requires the industry to leave diversions like NFTs and browser extension games aside. The world has more important problems to solve. The tools are there; the rest is a question of effort.

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