Crypto: helping the unbanked or underbanked?
I've heard many times the term unbanked, and how crypto can help the unbanked population.
What does it mean to be unbanked?
First of all, we must understand that "Unbanked" is a slang term for adults who do not use banks or banking institutions in any capacity. Unbanked persons generally pay for things in cash or else purchase money orders. Unbanked persons also typically do not have insurance, pensions, or any other type of professional money-related services. They may take advantage of alternative financial services, such as check-cashing and payday lending if such services are available to them.”
Why are people unbanked?
When you live in countries with greater development, you seem to forget realities across the world that are entirely different than yours. Having access to a bank account becomes a regular thing, unfortunately for others, this is very difficult to obtain or not as relevant to have.
“In high-income economies, almost all adults own an account — meaning the unbanked population can overwhelmingly be found in the developing world. Nearly half can be found in seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. By demographics, more than half of those unbanked are women and come from the poorest 40 percent of households within their country. They are more likely to have a low educational attainment or be out of the labor force”.
The majority of unbanked people come from the poorest sectors in society. Taking this into consideration, how will crypto help out in this situation?
Unbanked or Underbanked?
“Although some households are considered unbanked because they do not use banks or financial services at all, the underbanked segment of the population may have checking or savings accounts, but often access less traditional financial products and services, such as short-term payday loans and check cashing services.”
Why don’t underbanked people choose traditional financial services?
Some of the reasons, according to Investopedia: lower-income, discouraged from applying for an account or being denied credit from financial institutions. It is also reported that these underbanked people do use mobile phones almost as much as other families, thus can benefit from services available via mobile.
Cryptocurrencies function on a decentralized platform that can work anywhere in the world. There is no third party regulation in order to function; thus, it doesn't discriminate who can access it. This can become an excellent alternative for those unbanked or underbanked. On the other hand, crypto may have the benefit of instant transactions world-wide, but it can also be very tricky to understand and use, tricky but not impossible. This is why teaching and providing content for those who don’t know about crypto is critical for a mass adaptation. Getting people involved can make crypto reach places that have been left out of new technologies.
Venezuela and its unstable economy is an excellent example of why and how to adapt to digital currency. The devaluation of the local currency bolivar has affected the lives of many, and because of this, people have felt the need to reach out for different financial alternatives. I recently watched a documentary by Dash cryptocurrency; it turns out they have provided many services in Venezuela, and it seems to be working, but in order for this to happen they provided an adaptation plan. They are providing people, free classes, to learn the use of cryptocurrencies, which in this case is Dash.
Will it solve the problem of unbanked people?
No, it won’t, but it will indeed help; cryptocurrencies can solve many problems for this group of people.
However, the unbanked issue is much deeper than resolving accessibility. Yes, some unbanked individuals are in need of simpler ways to access transactions, among other financial services. On the other hand, there is another high percentage of people who belong to the poorest sectors who are unbanked, and they will at least need to have access to a mobile phone and internet.
These people not only have to deal with access issues but ultimately, people who suffer the scarcity of their country; from education, workforce, among others. This percentage of people I believe are the ones who are most left behind because even if crypto can help out many, it can't solve the root of these problems.
I hope you enjoyed it!