Banking activities like saving, depositing money, making online purchases, making transfers, and other banking transactions might seem like simple everyday things to you and me. However, there are still a large number of people in this world who do not have easy access to banks. As a result, as many as two billion people may not even have bank accounts.
This category of consumers, known as the unbanked, is especially prevalent in low- and middle-income emerging markets and third world countries, but it happens in developed first world countries as well. There are still many citizens around the world, especially those living in impoverished areas or slums who are not able to use banks as a way to save money, thus denying them the stability, safety and even the interests that banks provide.
Then, there are those categorised as the underbanked. They may have bank accounts, or access to banks, but are not able to enjoy the benefits as a banking customer. This could be due to many reasons including banks that do not want to extend credit to the underbanked because of the risk of non-repayment, or that interest rates are so high that the underbanked are not able to save money. Large banking corporations are even offering microfinance loans these days, but at such high interest rates, the underbanked’s financial power is seriously undermined.
It is well-documented that access to savings and loans can help those in the lower-income levels improve their financial circumstances. Without these, they could be stuck in poverty for generations upon generations.
How Blockchain Can Help The Unbanked and Underbanked
Through the power of blockchain technology, the financial fate of the unbanked and underbanked has the potential to change for the better. Blockchain provides alternative methods for the underbanked to conduct digital financial transactions. It’s a good as having a credit or debit card, but without the fees associated with these services.
One of the biggest challenges for banks in serving the underbanked is that individuals in this category do not have clear identification information. This makes it difficult for banks to identify and assess their customers. However, blockchain technology makes it easier for individuals to have a digital identity, and their own financial account. This would allow low-income individuals to be able to save and lend through a blockchain network.
One of the biggest financial transactions by citizens of developing countries is remittance of money by immigrants working in a foreign country, sent back to families back in their home country. Usually, foreign worked need to depend on their employers to help with remittance. Using blockchain technology, the process is seamless and far simpler.
Examples of Blockchain for the Underbanked
Different types of blockchain platforms for the underbanked include the following:-
- Digital wallet platform
- Blockchain lending facilities
- Investment platform for third-world country citizens
For example, with a Digital Wallet like FINX, users can buy and own digital currencies, and save it right on the platform. Users are not tied to the conventions of traditional banks and are able to safely and securely save money, thus increasing their net worth bit by bit. Sending remittance to family members overseas is also easier as everything is through the same app and system, all protected by passwords and encryption. The blockchain system is really the way of the future especially for the unbanked and underbanked, with huge possibilities in impacting the financial world in a positive way.