Unbanked people could lead the world to a bankless society. Blockchain is the revolutionary movement behind this idea, and it could eventually change how banks operate, says Carlos Chang, a project analyst for Mexo.
Unbanked Population of the World
More than 2 billion people worldwide still do not have a bank account. More specifically, the World Bank has declared that 45% of Latin American adults do not have an account at a financial institution. 207 million people do not have bank accounts in LATAM as of 2022. Furthermore, the World Bank has announced that 30% of the population, or 187 million people, lived in poverty in LATAM in 2022.
In addition, millions of Latin Americans will still not have access to financial services due to poor infrastructure in rural areas, where people until recently did not have bank accounts. Therefore, a significant challenge in many Latin American countries is to provide banking services to low-income families living in remote areas with little or no access to the physical branches of banking institutions.
We may think most of them live in middle-income emerging markets, but even in countries with high GDP, there are large numbers of people who are excluded from traditional financial services due to a variety of barriers:
1. Lack of reliable local banking infrastructure in remote areas
2. Inability to maintain the minimum deposit required for an account
3. Failure to provide a valid ID to register as a customer
Without access to savings and credit, these unbanked individuals cannot participate in the virtuous cycle of economic growth and the security and interest banks offer. The unbanked constitute a large market that any existing institution cannot well serve. In developing countries, mainstream banks are reluctant to provide credit to them. It often involves high-interest rates to offset the risk, which is a significant point for the unbanked.
Unbanked People and the Crypto Solution
Cryptocurrency provides banking services for people who do not have a bank account.
Cryptocurrency can provide banking services to people who do not have a bank account, allowing people without a bank account to send and receive funds across borders quickly. For people without a bank account, cryptocurrency is the perfect solution. It is an excellent way to use blockchain and cryptocurrency to help people without a bank account to enjoy financial services.
Small transactions have been costly for banks, and these frequent payments can dramatically increase transaction volumes and pose severe challenges for banks. Blockchain and cryptocurrency can significantly reduce the operating costs of these financial institutions. With blockchain and cryptocurrency, small payment transactions are no longer an issue. Blockchain can process transactions at a fraction of the cost, providing convenience and greater security for people’s money. As cryptocurrencies become less volatile, it has become an excellent alternative asset to mainstream finance.
Bankless Activity Has Already Started
Fintech companies now hold the key to making payments in the future. The future is even more critical when artificial intelligence, Web 3.0, robots, data analytics, and computer vision crystallize in finance. For example, the development of blockchain technology enables anyone to generate a non-custodial wallet, a decentralized system, and an investment account without needing a trusted intermediary to protect and allow access to the funds. As a result, Bitcoin, Ethereum, and thousands of other cryptocurrencies allow anyone to open private banking and investment accounts anywhere on the blockchain without the trust of any third party.
Bankless Society Developed on the Blockchain and Cryptocurrencies
Blockchain significantly improves traditional finance, enabling anyone to build an autonomous and sustainable cryptocurrency portfolio. At the heart of this revolution is blockchain-based technology that allows transactions to be authenticated using an immutable, trusted network of computers without human intervention. These rules can dictate actions, lock in value, automate transactions, and create considerable efficiencies in the marketplace at a fraction of the cost of our current systems.
Bitcoin provides an unprecedented mechanism for transparent participation. Income and expenses occur on the chain, meaning all cash flows are auditable. In addition, cryptocurrencies have a complete security system, which encourages investors. Cryptocurrencies also provide reliable transactions at a much faster rate than standard features from traditional banks. As a result, cryptocurrencies have proven critical to ushering in a better, more cashless financial era.
Cryptocurrencies are the Future for the Unbanked People and Bankless Society
One of the significant advantages of cryptocurrency is that it helps to combat financial inequality. Cryptocurrencies have narrowed the financial services gap and brought financial services to the unbanked worlds.
Cryptos have an extensive distribution network, which provides a robust financial infrastructure and is decentralized, which means that cryptocurrencies can bypass these advantages and bring many opportunities to their users.
Cryptocurrencies also offer the opportunity to innovate and fund the capital needed by entrepreneurs, especially in the growing global marketplace, where cryptocurrencies are a significant boost to countries with weak financial infrastructure and currencies.
In terms of financial inclusion, cryptocurrency is beginning to play a crucial role in finance. It has even proven to be more inclusive than microfinance institutions. As a result, they are bringing change to a bankless society.
About the author
Carlos Chang is a project analyst for Mexo, providing a comprehensive analysis of cryptocurrency operations. He is a specialist in conducting operational cost assessments, analyzing transaction status market liquidity and performing cryptocurrency earnings product analysis.