The year is 2019 and the adult population is 5.6 billion and rising. According to the world bank, 1.7 billion of those people have no access to the banking system. A rural Nigerien farmer for instance. His nearest bank is 8 hours away and he doesn’t have any form of ID. Banking for him is impossible.
Can bitcoin be the answer to the underprivileged who can’t reach our modern banking system?
Reasons for being unbanked could be, but not limited to:
- Lack of banking infrastructure
- No means of transport to bank
- Lack of documentation
- Underaged
Even the ones that do have access to a banking system, might be considered underbanked too. An ordinary Venezuelan citizen for example, has access to a bank account but cannot rely upon it due to hyperinflation nor can he freely trade globally due to strict trading regulations.
Who are the underbanked?
Without quoting exact numbers, there are many other people across the globe who have to suffer with a failing economy or financial system. How can you save your money in a bank account if your economy is suffering with hyperinflation? For many Western countries, we can be pretty with our payment systems. Our governments are pretty reliable and we think they are ok. Other governments are not so benevolent. What can bitcoin or other cryptocurrencies do to help the inadequately banked?
Remittance in bitcoin
Remittance is the transfer of money by a foreign worker to an individual such as family or friends back home. According to the world bank, in 2017 the amount of personal remittances received was $573 billion dollars.
A young Indian man for example moves to the United Kingdom for economic opportunity. Each month he sends £100 back home to his family who suffer from economic hardship.
On average he will have to use a third party, charging exuberant fees. Until recently, the most secure way of sending remittances were through a third party that would charge on average 7.5% in Q1 2017. An expensive service to say the least. Bitcoin doesn’t have the concept of borders, and thus has no premium on sending money from country to country. In fact, in countries where economies are suffering hardship, bitcoin prices come at a negative premium! People choosing to convert a stronger currency like the Euro or Dollar into bitcoin and then send back home, will not have to pay a premium. Instead they get a bonus!
Banking and trading in bitcoin
If it weren’t for the banking industry we wouldn’t be where we are today. Scaling of money and trades pre banks was pretty difficult. After all, if you wanted to do an international trade and had to pay in gold, it would be extremely difficult to transport and divide. Then you have the security issues too. Having banking greatly improved our ability to trade globally and grow as an economy. In the last 150 years whilst this has been happening, billions of people have been left in the dark. The banking system has failed these people. Infrastructure has never been built. Documentation to set up bank accounts is unattainable.
Nowadays most people do all their banking on their computers or mobile phones which also represents a struggle for many of the poor; until recently. Mobile phones are getting very cheap and even in some of the poorest countries are becoming readily available. Mobile data has become available which means even the secluded of people have become connected.
It is now possible for these people to become part of the global economy. It will be possible for people to make trades with their finger tips. Traditionally, trades for these people seem primitive to most of us. It will now be possible to store value outside of their restricted and closed off, and quite frankly- defunct local economy. Whilst most of us can only suffer with moderate inflation, some people around the globe are at the mercy of staggering hyperinflation.
Inflation in a country such as Venezuela is staggering and is represented above in the premium people will pay for bitcoin. Media outlet Bloomberg took it upon themselves to record the price of a cup of coffee in Caracas, Venezuela. In the past year, unofficial inflation is currently at 127,000%. One-hundred-and-twenty-seven-thousand percent. The banking system of Venezuela has failed its people.
Bitcoin could be considered a safe haven for these people and some people are already getting the gist.
3 ways Bitcoin is promoting freedom in Latin America.
The obstacles of a new technology
All new revolutions and technologies are rife with obstacles. In the early days of the internet, sending an email was something that only the geekiest of geeks were capable of. You would need to know how to code and spend a couple of hours on the task. If you were lucky, the email would arrive in a couple of days. Carrier pigeon might have been more effective. Bitcoin and cryptocurrencies are in a similar boat.
Transacting and storing your cryptocurrencies can be burdensome (check out our knowledge centre and trading guide!). There are also concerns about scaling solutions in bitcoin, just like there were with the internet. Worrying aside, most pensioners can send an email at the swipe of a finger now. Infants can navigate Youtube. These obstacles will show a natural progression of improved user interface and understanding of how they work.
Summary
It is a long way to go before bitcoin and cryptocurrencies have an everyday effect on people around the globe. However, it is already offering opportunities to people who live in economical hardship. Bitcoin and cryptocurrencies potentially offer some huge solutions to problems that once seemed inconceivable. The next decade will be an exciting one to say the least. Perhaps the remittance fees will be a thing of the past, or that Nigerian farmer will be able to save a little of his wages each month without the risk of a weakening local currency.