Why are cryptocurrencies great for the Unbanked and Underbanked? Cryptocurrencies have evolved and changed over the course of its 10-year history. Beyond just being a store of value (as in Bitcoin) and intelligent code (Ethereum Smart Contracts), cryptocurrencies have promising and real-world use cases that are starting to be taken seriously all around the world.
One such use case that has taken a life of its own is its use in supporting the Unbanked and Underbanked, people who are in struggling economies or who have difficulty being part of the global financial ecosystem.
Why cryptocurrency builds financial inclusion
Although most people in first-world nations and countries have readily available access to banks, electronic payment systems, and plenty of automation, it is something that we often take for granted. Financial inclusion refers to being a part of this ecosystem, which hugely improves the quality of life around the world. The notion of bank accounts is surprisingly foreign in some nations around the world, as there is a degree of mistrust and fiat-centric policymaking that has left people reliant on banknotes and localized trade.
For instance, in Southeast Asia, despite an increasingly large population who own mobile phones, banking is usually frowned upon as people are not willing to entrust their hard-earned money to somebody else – something which could be a matter of life and death. They have no bank accounts or do not qualify for a bank account, and are thus restricted to local finance. We’ve all heard stories of migrant workers who struggle to send back money to their homes, with transaction fees at an obscene percentage of their total take-home pay – the problem lies with the lack of a proper banking system in these countries.
Cryptocurrencies are becoming an increasingly more suitable method for these users. With average mobile connectivity and smartphone penetration increasing throughout the population in these countries, cryptocurrencies seem to be the quickest way that their users can gain access to the global financial ecosystem, all without having to trust a bank! The decentralized nature of cryptocurrencies means that their cryptocurrencies will always be theirs even if it is digitalized, and if explained correctly could potentially sway the underbanked to rely on it as a form of banking.
Real-world cryptocurrency use in times of crisis
The biggest example of how cryptocurrencies have successfully been used as an alternative to the traditional fiat banking system can be found in one of the most difficult economies in the world: Venezuela. As their economy is currently going through a hyperinflation crisis, with money earned in the local currencies easily losing their value overnight, cryptocurrencies have become a safe haven there – particularly low-transaction fee coins such as Nano, which promise a zero-fee way of transferring value.
Startups are even venturing into this unstable climate to bring financial inclusion to the Venezuelan people: a local business platform called Mega Soft which operates point-of-sale tools partnered merchant-gateway startup Cryptobuyer to allow merchants to accept Bitcoin, Ether, Dash, Litecoin, Tether, and other cryptocurrencies. The CEO of Cryptobuyer, Jorge Farias, even points out that US dollars and other foreign fiat currencies have limited supply are not suitable for local trade as there is difficulty in issuing change, while cryptocurrencies do not have this problem.
How to avoid volatility when using cryptocurrencies for payment
Many naysayers often point to the fact that cryptocurrencies are not suitable for financial inclusion due to their inherent stability. However, various cryptocurrencies exist to tackle this problem – stable coins such as Tether (USDT) or TrueUSD (TUSD) are a great example of this.
Providing financial inclusion serves as a mainstay of the discussion around how cryptocurrencies could be used to greater benefit society as a whole. With the power of blockchain technology, plenty of other issues can be addressed – Oobit highlights these potential solutions and issues each week, so follow us at our blog to learn more about cryptocurrencies and how we are working together as a community to bring change to the world!