Think about everything you use your bank for.
Those new Air Jordans you bought on eBay. Your Netflix subscription. That emergency money your mum sent you when you got stranded overseas.
You probably receive your salary via a bank transfer, then send some (perhaps most) of it via direct debit to pay your rent. Or, if you own real estate, you almost certainly used your bank to get that dreaded mortgage.
While you may hate your bank for charging high interest and taking several days to clear your transactions, you probably also realize that you’d be screwed without it. Imagine how much time and effort you’d waste if you had to all that in cash, in person.
For nearly a third of the planet’s population, this is the reality. These are the two billion unbanked people of the world, for whom taking part in a globalized economy has been little more than a pipe dream. Until now.
Where traditional institutions have failed, cryptocurrencies are picking up the slack. Now, all you need is a smartphone and an internet connection to send and receive crypto anywhere in the world. That’s exciting for those of us who live relatively comfortable lives in the West. But for people in developing countries, it’s vital.
Why we can’t bank on the banks
If you live in a war-torn area or you’re from a persecuted minority, you can’t just go to your local bank and open an account. You need to prove your identity and address, which is not easy when you have to deal with archaic or corrupt bureaucracies. Even if you can prove those things, the bank might refuse you for no good reason.
Without a bank account, you’re essentially stuck where you are. If you want to relocate – or even travel somewhere temporarily – you’ll have to bring all your cash with you at your own risk.
Regardless of your competence, you almost certainly won’t be able to find a decent job if you don’t have a bank account. Even if you do find cash-in-hand work, you’re at the mercy of your employer; they could pay you late or shortchange you and you’d have a hard time proving it. And, as Afghan entrepreneur Roya Mahboob discovered, without a bank account you can forget about working online.
The banks have made no major progress towards solving these problems. That’s where crypto comes in.
Within the right framework, crypto could allow unbanked people to easily exchange value, both locally and internationally. All they’d need is a smartphone and an internet connection to open their own crypto wallet. With the boom in affordable smartphones over recent years, this is more achievable than ever.
OECD Blockchain Advisor and experienced FinTech regulatory consultant Loretta Joseph told Coined Times that some unbanked people are already embracing this possibility.
Payment methods beyond traditional ones are happening in emerging places where mobile providers act as financial institutions.
How can unbanked people get crypto in the first place?
As we’ve established, unbanked people can easily open their own crypto wallets on a smartphone or a PC. But how can they get crypto if they can’t use a credit card to buy coins on exchanges?
Crypto ATMs could be one solution to this problem. Access to secure machines would allow people to quickly convert cash into crypto. It’s not as convenient as using an online exchange, but it could provide a user-friendly way for unbanked people to get started.
At the moment, most crypto ATMs are BTC-specific. They also charge extortionate conversion fees of anywhere from two to 10 percent. Because of those high fees and limited range, crypto ATMs are little more than a gimmick at present.
However, the first company to install multi-currency crypto ATMs that offer reasonable conversion rates in developing countries could make a fortune. They’ll also be doing the world’s unbanked people a huge favor.
Airdrops could be another way to kick-start crypto economies among the unbanked. Humaniq – a British start-up offering crypto payment solutions for unbanked people – offers US$20 worth of its HMQ cryptocurrency to all new users. On a large scale, this strategy could encourage people to start using the currency to exchange value.
Security, scalability, interoperability
There are several major obstacles to overcome before the world’s unbanked people reach crypto utopia. Perhaps the most pressing of these is security.
If we expect people to store their life savings in crypto wallets – as they would in banks – then we need to make sure those wallets will never be hacked.
From the user’s end, blockchain could provide the answer. A host of organizations around the world are working on blockchain-based identity management solutions that would allow users to protect their crypto wallets with biometric data, such as facial recognition and fingerprint scanning.
Joseph identified “scalability and interoperability” as two other issues slowing crypto adoption among unbanked people. For crypto to work as a mainstream payment method, it needs to function on a large scale and integrate seamlessly with other technologies and payment methods.
As Joseph pointed out, regulation is also a key factor. Governments need to establish regulations that protect users and clearly define how they can legally use their crypto assets.
Educating unbanked people about crypto
Before unbanked people adopt crypto as a payment method, they need to understand it. That will require clear, targeted marketing strategies catering to a host of different languages and cultures. It’s not an easy task, and it won’t happen overnight.
Several companies are targeting the unbanked market. OmiseGO has similar plans to Humaniq; reducing reliance on banks and promoting financial inclusion. The success of these cryptocurrencies – and their competitors – will rely not just on their technology and market performance, but on how well they educate unbanked people about the potential of crypto.
In an industry that focuses too often on short-term profits and hype, the world’s unbanked people should not be forgotten. After all, the crypto revolution has more potential upside for them than for anyone else.