Unbanked is an informal term used to describe adults that do not use banks or any banking institutions in any capacity. Unbanked people also typically do not have insurance, pensions, or any type of professional money-related services.
Some people will always require nearby branches, as well as a safe way to travel to them, but for many in emerging markets that is just not possible. In fact, 2 billion people remain unbanked on a worldwide scale. The world bank has estimated that a third of these 2 billion people without access to modern financial systems are living in Sub-Saharan Africa.
Throughout the world of cryptocurrency, or more specifically, ever since the creation of Bitcoin, we have seen an influx of unbanked users who suddenly had access to financial services on a worldwide scale. They want their transactions, as well as their account balance, to be private. Not only that, but they do not want a central authority controlling any of their funds in any way. Think about it, if you have an account within a bank, they could, assuming they were prompted to, freeze your assets. With a decentralised system, there is no central authority, so you – and only you – control your funds, how they are used, and who can see or access them.
That being said, financial systems allow many ways for you to improve your quality of life. From loans to mortgages, they offer you the possibility to start a business or build a home. Deposits are typically a safe way of saving for a large purchase or planning ahead. Having better access to financial services, as well as economic development and a higher level of employment rate, can provide these people with opportunities.
Cryptocurrencies have proven to be a practical way of bringing financial services to just about anyone, regardless of their location or income. For people without access to good local banks, cryptocurrencies are the solution.
Just by having a smart device with an internet connection, anyone can manage to use cryptocurrencies to send and receive money. It’s fast, cheap, and sometimes more secure than mobile banking. The technology is flexible and the barriers to entry are extremely low. Over 700 million of the world’s unbanked do not yet own a mobile phone. It is unlikely at this stage that a traditional ‘bricks and mortar’ bank will open a branch in their village. Their first interaction with financial services is likely to be enabled by that phone, and they simply won’t care about the historical differences between traditional CeFi and new DeFi.Given the fact that cryptocurrencies, as well as blockchains are evolving daily, transaction costs are being reduced, which means they can become viable options for everyday expenses. Those currently unbanked have the potential of overtaking western society in financial inclusion as the industry finds ways to innovate. With the demand for cryptocurrencies being higher than ever before, and the growing base of millennials and gen-z users who understand the underpinnings of the technology, it is foreseeable that cryptocurrencies and decentralised finance are the way many in the future will manage their spend.
Verso Finance is on the path to making this a possibility.