How can cryptocurrency help the unbanked?

By CNBCTV18.com IST (Released)

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Let’s see how digital assets can help the global unbanked population.

In July 2022, the global unbanked population stood at 1.4 billion people, according to World Bank data. These people do not have access to the banking system or choose not to participate in it. This disparity in financial inclusion is causing the rich to get richer and the poor to get poorer.

Those who have access to the services of a bank have access to loans, credit cards, mortgages and more, leaving the unbanked at a severe disadvantage. Fortunately, cryptocurrency offers this segment of the population a viable alternative to traditional banking and brings them into the financial fold.

Let’s see how digital assets can help the global unbanked population.

Less documentation:

The poorest in the world have no identity papers. They lack a birth certificate, they don’t have an Aadhaar card, they have never received a school certificate or applied for a passport. Without these documents, obtaining a bank account is almost impossible.

On the other hand, cryptocurrencies do not need any documentation. All it takes is a smartphone, the internet, and a little learning curve. There are also plenty of videos online to guide people and help them set up their wallets and start trading.

Accessibility: Cities are full of bank branches, but remote areas are often neglected. It’s not the banks’ fault; it’s just capitalism at work. Fortunately, cryptocurrencies do not need bank branches; they only need a smartphone and the internet. Moreover, with smartphones becoming cheaper and internet connectivity spreading by leaps and bounds, cryptocurrencies have the potential to reach every nook and cranny of the world.

No minimum balance: What may seem like overkill for city dwellers is actually a big deal for the country’s poor. They cannot maintain a minimum balance. Today, most savings accounts require a minimum balance of Rs 1,000, which goes up to Rs 25,000 for some accounts.

Most of the unbanked population either does not have this kind of money or cannot afford to keep it in their account. Moreover, fines are also threatened if the account balance falls below the required minimum. All of this drives people away from traditional banking. Crypto doesn’t need a minimum balance, you don’t even need to use the wallet regularly to keep it activated.

Eliminates Human Bias: The banking system is run by people. This leaves room for intolerance and prejudice. For example, there is always a risk that a person of a certain race or caste will be denied banking services. However, with show-stopping algorithms, crypto doesn’t care about your color, caste, religion, or creed; you are a number among numbers and you will be treated as such. Indifferently.

What can the unbanked do with cryptocurrencies?

As mentioned earlier, anyone can create a crypto wallet. After setting up the wallet, one can send and receive crypto payments. This allows individuals to transact without a bank account. They can quickly receive funds from their relatives abroad without papers or formalities. They can also store the crypto in their wallet and watch it grow over time. This allows them to beat the devaluing effect of inflation. It’s much better than keeping physical cash at home, and in some cases also outweighs cash hidden in a fixed deposit.

Conclusion

Right now, the hype around cryptocurrency is tied to amazing returns and investors making tons of money. However, when the buzz dies down, cryptos will stand out as fast, affordable, and all-inclusive means of transaction. They eliminate banks and intermediaries from the financial sector and make it easier to store, send and receive value.

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