Blockchain providing solutions to the Unbanked
Jan 15, 2018 Posted / 10789 Views
Banks are considered as the powerful forces, which run the world. However, to everyone's surprise, about two billion people in the world still do not possess a bank account. A major portion of the world population dwells in low and middle earnings developing markets, although even in high-income countries too, considerable size of people are unaware about the banking system and procedures, which is why they remain cut off from Banks. This suggests that they are unable to utilize the ease, security and interest that banks can offer.
Furthermore, out of all those people who can access and use bank accounts, do not have sufficient introduction and awareness regarding the financial services that banks can render. These people can be termed as the underbanked. For instance, in the United States alone, 33.5 mln households were identified in 2015 as unbanked or underbanked, (which amounts to over 25 percent of the population) Now this is astoundingly high number, these people do not have access to savings and credit and thus can not participate in the economic growth, instead they remain degraded in a wicked rounds of poverty.
Apparently, if we take the integrated data of the unbanked and underbanked, they constitute a substantial market that is not adequately subserved by current companies. The problem is considerably high in the third world countries, large banks do not want to stretch credit to the underbanked. Also when they give credit, they impose very high-interest rates to counteract the uncertainty. The research data suggests that for long time microfinance institutions presented a system for the underbanked to obtain much-needed credit, though, in current years, big banks have entered the area of microfinance. In the manner, the interest imposed on microfinance loans has grown significantly and become a principal pain notch for the unbanked.
In recent years, Blockchain has developed as the technology solution, which has the potential to disrupt almost every sector in the commerce for better. Clearly, this technology has been argued that it can facilitate the unbanked and underbanked by empowering them to design their individual monetary option in an efficient, clear and scalable manner. The biggest challenges, however, which banks face when attempting to assist the unbanked is that several of them do not have explicit revealing information, making it challenging to execute “Know Your Customer” methods.
Blockchain can provide individuals with a digital identity, which they can further use in their banking. In fact, this disruptive technology can also provide a solution for property rights, which are almost confusing and painstakingly difficult for many low-income people. These rights can also be moved onto the Blockchain, allowing them to penetrate official information networks and even leverage their property as security. Not only this, it can also make the payment painless and efficient, allow low-income individuals in diverse countries to save and loan mutually.
Many straightforward and simple things such as keeping savings without fear of theft or getting a loan when in need can be worrisome and troubling for those who are not able to access the protection and convenience of a bank account. We need to understand that these people are not limited in the world; in fact, they constitute the major portion of the world population. Blockchain can provide disruptive financial solutions, which are outside the area of the traditional banking system. Moreover, it is more secure and more scalable mechanism, which is adequate according to the needs of the individuals, and a large number of technology companies is leveraging it to guide the world where everyone can have access to the savings and credit, which are a fundamental building block for economic growth.
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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