A Revolution is Coming for People Outside the Banking System

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Unbanked peo­ple could lead the world to a ban­k­less soci­ety. Blockchain is the rev­o­lu­tion­ary move­ment behind this idea, and it could even­tu­al­ly change how banks oper­ate, says Car­los Chang, a project ana­lyst for Mexo.

Unbanked Population of the World

More than 2 bil­lion peo­ple world­wide still do not have a bank account. More specif­i­cal­ly, the World Bank has declared that 45% of Latin Amer­i­can adults do not have an account at a finan­cial insti­tu­tion. 207 mil­lion peo­ple do not have bank accounts in LATAM as of 2022. Fur­ther­more, the World Bank has announced that 30% of the pop­u­la­tion, or 187 mil­lion peo­ple, lived in pover­ty in LATAM in 2022.

In addi­tion, mil­lions of Latin Amer­i­cans will still not have access to finan­cial ser­vices due to poor infra­struc­ture in rur­al areas, where peo­ple until recent­ly did not have bank accounts. There­fore, a sig­nif­i­cant chal­lenge in many Latin Amer­i­can coun­tries is to pro­vide bank­ing ser­vices to low-income fam­i­lies liv­ing in remote areas with lit­tle or no access to the phys­i­cal branch­es of bank­ing institutions.

We may think most of them live in mid­dle-income emerg­ing mar­kets, but even in coun­tries with high GDP, there are large num­bers of peo­ple who are exclud­ed from tra­di­tion­al finan­cial ser­vices due to a vari­ety of barriers:

1.            Lack of reli­able local bank­ing infra­struc­ture in remote areas

2.            Inabil­i­ty to main­tain the min­i­mum deposit required for an account

3.            Fail­ure to pro­vide a valid ID to reg­is­ter as a customer

With­out access to sav­ings and cred­it, these unbanked indi­vid­u­als can­not par­tic­i­pate in the vir­tu­ous cycle of eco­nom­ic growth and the secu­ri­ty and inter­est banks offer. The unbanked con­sti­tute a large mar­ket that any exist­ing insti­tu­tion can­not well serve. In devel­op­ing coun­tries, main­stream banks are reluc­tant to pro­vide cred­it to them. It often involves high-inter­est rates to off­set the risk, which is a sig­nif­i­cant point for the unbanked.

Unbanked People and the Crypto Solution

Cryp­tocur­ren­cy pro­vides bank­ing ser­vices for peo­ple who do not have a bank account.

Cryp­tocur­ren­cy can pro­vide bank­ing ser­vices to peo­ple who do not have a bank account, allow­ing peo­ple with­out a bank account to send and receive funds across bor­ders quick­ly. For peo­ple with­out a bank account, cryp­tocur­ren­cy is the per­fect solu­tion. It is an excel­lent way to use blockchain and cryp­tocur­ren­cy to help peo­ple with­out a bank account to enjoy finan­cial services.

Small trans­ac­tions have been cost­ly for banks, and these fre­quent pay­ments can dra­mat­i­cal­ly increase trans­ac­tion vol­umes and pose severe chal­lenges for banks. Blockchain and cryp­tocur­ren­cy can sig­nif­i­cant­ly reduce the oper­at­ing costs of these finan­cial insti­tu­tions. With blockchain and cryp­tocur­ren­cy, small pay­ment trans­ac­tions are no longer an issue. Blockchain can process trans­ac­tions at a frac­tion of the cost, pro­vid­ing con­ve­nience and greater secu­ri­ty for people’s mon­ey. As cryp­tocur­ren­cies become less volatile, it has become an excel­lent alter­na­tive asset to main­stream finance.

Bankless Activity Has Already Started

Fin­tech com­pa­nies now hold the key to mak­ing pay­ments in the future. The future is even more crit­i­cal when arti­fi­cial intel­li­gence, Web 3.0, robots, data ana­lyt­ics, and com­put­er vision crys­tal­lize in finance. For exam­ple, the devel­op­ment of blockchain tech­nol­o­gy enables any­one to gen­er­ate a non-cus­to­di­al wal­let, a decen­tral­ized sys­tem, and an invest­ment account with­out need­ing a trust­ed inter­me­di­ary to pro­tect and allow access to the funds. As a result, Bit­coin, Ethereum, and thou­sands of oth­er cryp­tocur­ren­cies allow any­one to open pri­vate bank­ing and invest­ment accounts any­where on the blockchain with­out the trust of any third party.

Unbanked people: the revolution is coming

Bankless Society Developed on the Blockchain and Cryptocurrencies

Blockchain sig­nif­i­cant­ly improves tra­di­tion­al finance, enabling any­one to build an autonomous and sus­tain­able cryp­tocur­ren­cy port­fo­lio. At the heart of this rev­o­lu­tion is blockchain-based tech­nol­o­gy that allows trans­ac­tions to be authen­ti­cat­ed using an immutable, trust­ed net­work of com­put­ers with­out human inter­ven­tion. These rules can dic­tate actions, lock in val­ue, auto­mate trans­ac­tions, and cre­ate con­sid­er­able effi­cien­cies in the mar­ket­place at a frac­tion of the cost of our cur­rent systems.

Bit­coin pro­vides an unprece­dent­ed mech­a­nism for trans­par­ent par­tic­i­pa­tion. Income and expens­es occur on the chain, mean­ing all cash flows are auditable. In addi­tion, cryp­tocur­ren­cies have a com­plete secu­ri­ty sys­tem, which encour­ages investors. Cryp­tocur­ren­cies also pro­vide reli­able trans­ac­tions at a much faster rate than stan­dard fea­tures from tra­di­tion­al banks. As a result, cryp­tocur­ren­cies have proven crit­i­cal to ush­er­ing in a bet­ter, more cash­less finan­cial era.

Cryptocurrencies are the Future for the Unbanked People and Bankless Society

One of the sig­nif­i­cant advan­tages of cryp­tocur­ren­cy is that it helps to com­bat finan­cial inequal­i­ty. Cryp­tocur­ren­cies have nar­rowed the finan­cial ser­vices gap and brought finan­cial ser­vices to the unbanked worlds.

Cryp­tos have an exten­sive dis­tri­b­u­tion net­work, which pro­vides a robust finan­cial infra­struc­ture and is decen­tral­ized, which means that cryp­tocur­ren­cies can bypass these advan­tages and bring many oppor­tu­ni­ties to their users.

Cryp­tocur­ren­cies also offer the oppor­tu­ni­ty to inno­vate and fund the cap­i­tal need­ed by entre­pre­neurs, espe­cial­ly in the grow­ing glob­al mar­ket­place, where cryp­tocur­ren­cies are a sig­nif­i­cant boost to coun­tries with weak finan­cial infra­struc­ture and currencies.

In terms of finan­cial inclu­sion, cryp­tocur­ren­cy is begin­ning to play a cru­cial role in finance. It has even proven to be more inclu­sive than micro­fi­nance insti­tu­tions. As a result, they are bring­ing change to a ban­k­less society.

About the author

Car­los Chang is a project ana­lyst for Mexo, pro­vid­ing a com­pre­hen­sive analy­sis of cryp­tocur­ren­cy oper­a­tions. He is a spe­cial­ist in con­duct­ing oper­a­tional cost assess­ments, ana­lyz­ing trans­ac­tion sta­tus mar­ket liq­uid­i­ty and per­form­ing cryp­tocur­ren­cy earn­ings prod­uct analysis.

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