Being able to access basic banking services is pivotal in helping those that live in poverty — is Blockchain Technology able to provide the best solution?

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While many of us take the convenience of modern electronic banking for granted, a significant portion of the population actually lacks access to banking services. According to a 2017 report done by the FDIC, over twenty-five percent of Americans either do not have a bank account or are not able to use their account to cover all of their financial needs. This problem only becomes more evident when you look at developing countries, those not as wealthy as the United States. Around 1.7 billion adults on the planet do not have access to banking, according to a recent report from the World Bank’s Global Findex database.

In today’s day and age it is hard to believe that so many people, especially those living in extreme poverty in developing nations, are excluded from a formal type of banking system. This forces the most needy to seek risky and costly alternatives and that keeps them in a cycle of poverty. There is growing interest, especially by those in the blockchain technology community, on how to extend financial services to the unbanked and underbanked.

Improving Access to Financial Tools for Everyone

Not having access to a basic financial services, like having a bank account is a major hurdle to alleviating poverty, so much so that the United Nations has included it as a significant part of seven of its 17 Sustainable Development Goals to encourage sustainable development of poverty-stricken nations around the world. But sustainable financial growth becomes more difficult as many if not most of the major banks have greatly reduced their presence in poverty-stricken areas due to the high cost of supporting brick and mortar locations and the extreme risk. The people living in these underserved areas need the safety of a bank, but lack access.

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Blockchain technology can help change the financial landscape for the unbanked and underbanked

Benefits of Blockchain Technology:

  • It’s decentralized. Cryptocurrencies like Bitcoin don’t require a local bank branch or even a central banking network to offer much-needed banking services to those in less-developed nations where traditional banking services don’t exist. All that is required is a mobile phone and internet connection
  • It’s secure. Using advanced algorithms and storage techniques, blockchain platforms ensure that anyone who uses it can feel reasonably certain that their information will remain private
  • It’s borderless. Blockchain technology can help everyone participate in the modern digital economy, even people living in less developed nations
  • It has the potential to improve personal finances by storing identities digitally, creating credit histories through tracking transactions which ultimately helps those with lost identities and no credit histories to have access to loans
  • Cross border financial transaction costs are lower
  • Small businesses can use cryptocurrencies for international payments allowing them to participate in the global economy

Why Blockchain as a Banking Alternative Makes Sense

Blockchain has all the elements needed to act as a banking alternative for people all over the world. In fact, a number of blockchain-based cryptocurrencies already exist to meet the needs of users, with Bitcoin being the most popular. These blockchain-based currencies are more secure than many other forms of digital currency, providing better protection against fraud and restricting access to the funds so that only authorized users can make transactions.

As underbanked areas begin to gain affluence simply by having access to a blockchain-based banking alternative, lending options and other financial services are likely to proliferate. It could easily open up new opportunities in areas where banks are scarce and traditional loans are hard to get due to a lack of identification.

Some financial providers are already experimenting with blockchain-based debit and credit cards. These cards give users a way to access cryptocurrency stored in digital wallets for real-world transactions in places where cryptocurrency is not traditionally accepted. Companies like Wirex offer prepaid cards loaded with cryptocurrencies that will automatically convert funds into fiat for use. A Wirex cardholder can load their card with 1 of 50 supported cryptocurrencies. It’s free to load the card, and you can transfer funds directly from your bank account to purchase crypto.

The Future of Banking

Can blockchain-based commerce and lending finally do what traditional banks have not and create more financial opportunities for people everywhere?

Many great companies are doing their best to contribute viable solutions to some of the challenges facing the unbanked and underbanked. Smart Sapien, a Canadian company has launched the Silver Linings project a blockchain based digital identity and marketplace solution to address identification and other challenges facing homeless youth.

“Blockchain is a revolutionary piece of technology that has the ability to create a unique identification in a digital world and also create a ubiquitous source of value from the data we offset from a variety of sources. I am confident that Blockchain will play a large part in reducing the amount of poverty in this world, whilst helping the less fortunate become more educated and communicated to others for a faster rehabilitation process.” — Matt Hinkley, CEO Smart Sapien & Co-founder and CEO Liquidus

Blockstream, the global leader in Bitcoin blockchain technology launched the Blockstream Satellite network which broadcasts the Bitcoin blockchain around the world 24/7 for free, protecting against network interruptions and providing anyone in the world with the opportunity to use Bitcoin.

“Currently, blockchain and cryptocurrencies represent an accessible solution to the unbanked. We don’t know if it is THE sustainable problem-solver, yet, we do know that at this time, at this moment, there are no better ones.” — Anna Niemira, Director of Business Development at CryptoChicks

“Cryptocurrencies such as Bitcoin and Ethereum are inherently innocuous despite some claims that they are tools of the black market to hide criminality, or more hopefully, technologies that will usher in an egalitarian world by disintermediating rapacious bankers. Instead, cryptocurrencies are digital assets that can empower trade and services interactions with near instant global fulfillment and an immutable record that does not require facilitating or mediating institutions.

As well, the underlying cryptocurrency infrastructure (Blockchain Technology) enables data processes to trigger and consume transaction governance details automatically, providing the dynamic nexus of the Internet of Things (IoT) and Artificial Intelligence (AI). This is especially important to distribute services to the least served populations in the world. Branch Banking infrastructure does not serve hundreds of millions of people all over the world and even where the infrastructure is in place, prohibitive policies and fees leave millions unbanked — 37 million in the US alone! Cryptocurrencies and Blockchain also protects the ownership and earned remittance of vulnerable and/or remote workers. Here at CodingFly, we have 130,000 computer coders that are ensured that when the results of their work (Intellectual Property — IP) is utilized, an automatic Smart Contract trigger embedded in the transaction releases payment to the Developer, regardless of where they are in the world without the need to pay fees to pay for a transfer or wait for clearing times. This also ensures that the people who perform the work are the people that receive the value that it represents. With the advent of IoT and AI this protection is essential for all workers in an automated global economy.”

Randy McGuire, Co-Founder CodingFly

Blockchain technology and the cryptocurrencies that are built on top of it can truly be the technological opportunity needed to improve the lives of those living in poverty. By helping them digitize their identities and their capital, receive access to loans and by granting them access to global markets this growing technology could potentially allow them to leave poverty behind.

Audrey Nesbitt on Linkedin

SpinSpirational Marketing & PR

@AudreyNesbitt11 on Twitter

This story is published in The Startup, Medium’s largest entrepreneurship publication followed by +421,678 people.

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