Many of them live in developing and least developed countries where they do not have basic bank accounts to save their savings, or in other words, are excluded from the financial society.
There are various challenges that include not earning enough to save, bank charges, complexity in opening bank accounts, documents required to open bank accounts, bank charges, and others that have kept billions out of the banking system for years.
As banks use multiple forms, require various documents, manual compliance checks, in-person identification checks, visits to banks, and a cumbersome process to get a bank account, it is also responsible for people not opening bank accounts.
According to the World Bank, over 1.7 billion people are still unbanked, and the majority are in Morocco, Vietnam, Egypt, the Philippines, and Mexico, despite having more than 60% internet penetration, except for Egypt which has 45%.
Over 51% of the population is still unbanked in Nigeria, Peru, Columbia, Indonesia, and Argentina.
Even though it has just 34% internet penetration, India has a 20% unbanked population. This figure was huge in 2014, but in the last seven years, the Narendra Modi government program on opening zero balance bank accounts (Jan Dhan Yojana) has included 446 million people in the financial fold.
How blockchain is changing it
As now we have understood the reasons why billions are unbanked, let us now see how blockchain can change this scenario and bring all 1.7 billion into the banking fold.
Since the world’s first cryptocurrency, Bitcoin, was introduced in 2009, it has triggered disruption in the banking and finance industries.
The technology-based on distributed ledger technology is now slowly catching pace among people, who are believed to be left out without any bank account.
Entering the financial fold through blockchain is very simple. You just need a crypto wallet to receive and send cryptocurrencies, an electronic device, and an internet connection to access your wallet 24X7 from any part of the world.
When Bitcoin started it was only focusing on peer-to-peer (P2P) payments which were launched during the 2008 recession when inflation touched a new high.
But, gradually, there were many cryptocurrencies that started offering more than P2P and ventured to launch services that only banks were offering.
Today, you can earn interest, send and receive money instantly, loan your crypto assets and earn passive income by staking your assets on many crypto platforms.
By doing this, users don’t have to approach banks and follow the cumbersome process, they just need to open a crypto wallet, which can be done in minutes and is absolutely free. There is no third party that will verify any account. You can open as many wallets as you want, but it is wiser to have only one to two, otherwise, there might be too many private keys to remember.
Today Decentralized Finance (DeFi) is one of the best crypto projects that are attracting millions of users, as it provides more features than your banks or financial institutions provide to users today.
As per CoinMarketCap, DeFi market capitalization is around $136 billion and is growing year after year, as more and more new use cases are coming up.
With blockchain offering scope to the unbanked, now even traditional banks are eyeing this technology to reach out to the unbanked population, by streamlining the account opening process.
Unbanked people today have more options than 10 years back, as they have an alternative to traditional banking & finances, which offer them complete control of their money. This will not only bring them into mainstream finance but provide un unprecedented financial freedom.
