According to a recent FDIC poll, there are more than 7.1 million unbanked families in the US. i.e., there isn’t a single bank account in the home.
One of the top three reasons none of the family members had a bank account was a lack of confidence in financial institutions and privacy issues. “Don’t have enough money to meet minimum balance requirements” was reported as the main reason for being unbanked by around half of the families.
The statistics on a worldwide scale are far worse. A World Bank analysis estimates that over 1.4 billion people worldwide lack access to financial services. These people frequently have to labor in difficult conditions, and their daily transactions are all done in cash.
The solution to this is cryptocurrency.
It was Satoshi Nakamoto’s main objective to eliminate all middlemen from financial transactions when he published the Bitcoin whitepaper in 2008. His goal was to develop a reliable system that would let two parties do business together without the involvement of a third party (like a bank).
Learn about the difficulties faced by the unbanked and how Bitcoin might be of assistance.
The difficulties faced by the unbanked
The availability of financial services is a problem for millions of individuals worldwide. These individuals lack a practical means of saving money or holding it securely. Also unavailable to them are credit and debit cards, loans, mortgages, and online financial services. The result is financial instability and poverty for the underprivileged population.
Let’s examine the reasons why so many people do not have bank accounts.
Lack of income: The FDIC found that 48.9% of respondents were without a bank account because they couldn’t maintain the minimum balance requirements. They are thus unable to obtain a bank account, regardless of their desire.
Minorities, low-income families, and those earning low incomes are unfairly treated by banks. Because of this, escaping poverty is exceedingly challenging. Considering that unbanked individuals are unable to create a savings account to earn interest or seek for loans to fund their schooling or launch a new enterprise.
Banking costs: A third of the unbanked population lacks a bank account as a result of hefty banking fees. There are many various ways that banks profit from their depositors, from account opening fees to overdraft fees and credit card interest. These fees are unpredictable and fluctuating. Based on the state of the economy and the market, banks may raise their rates.
According to the FDIC poll, 31.3% of those without a bank account stated the ‘unpredictability of bank fees‘ as their reason for not having one. Many people are unaware of how banks calculate their fees, if at all. This may also be a significant deterrent to joining banks. The average length of a bank’s account disclosure statement, according to research by Pew Health Group, ranges from 21 to 153 pages, making it far from a quick and simple read.
Those with limited salaries cannot afford to lose what little money they do have. Furthermore, they find it challenging to trust powerful financial organizations due of the unpredictable nature of bank fees.
Banks are no longer the safest location to store our hard-earned money, leading to distrust in the financial system. We have seen banks fail repeatedly as a result of weak risk management and controls. Additionally, fraud, corruption, and cyberattacks on banks make matters worse. In a few of hours, Bangladesh Bank lost 81 million dollars in 2016.
We’ve all heard about the infamous Wells Fargo case, when staff created two million bogus client accounts to reach sales targets as a result of top management’s actions. Not just that. A trillion dollar British bank, HSBC, was charged in 2021 with helping the Mexican and Colombian drug gangs launder their cash.
How is cryptocurrency helpful?
It is clear that banks are not motivated to help the unbanked with their problems. It’s time for unbanked individuals to start assisting themselves by adopting cryptocurrency. The challenges that the unbanked currently confront can all be resolved by virtual currencies like Bitcoin. Learn about the potential benefits of crypto.
On the other hand, anyone may use cryptocurrency. Cryptocurrency ownership is free, and there are no fees or minimum balance restrictions. Even if your transaction volume is only $1, you may open a free account and begin utilizing any Bitcoin wallet. You will only pay a modest network charge, which is a very small portion of your overall payment, whether you trade locally or transfer payments internationally.
Anyone can use cryptocurrency: Crypto may be used by anybody and everyone. You may utilize cryptocurrency regardless of your location or financial situation. To begin conducting cryptocurrency transactions, all you need is a smartphone and an internet connection. To save, spend, and invest using cryptocurrency, you create an account with a cryptocurrency payment processor.
No extra fees or minimum balance: Banking fees have grown to be a major barrier for those without access to banks. They couldn’t afford the numerous fees banks impose on depositors because of their little income. Additionally, they are suspicious of banks and other financial organizations due to the ambiguity of costs and inconsistent account maintenance expenses. There is no requirement for a high credit score or difficult verification procedures.
Cryptocurrency is the perfect banking substitute for the unbanked due to its widespread accessibility, simple signup process, and minimal entry hurdles.
Cryptocurrencies are decentralized, making them free from tyranny. They cannot be wiped off or freely printed. The majority of cryptocurrencies are created using software that is configured to produce a finite amount of coins. Therefore, no matter how large they are, financial institutions are unable to inflate cryptocurrencies.
Additionally, because cryptocurrency is decentralized, no one can freeze your assets or dictate how you spend them, making it free from any type of dictatorship.
Conclusion
The ability to participate in the global economy is one way that cryptocurrency can help the unbanked. In contrast to banks, cryptocurrencies are decentralized, have low entry barriers, and drastically reduce transaction costs. Many nations are already using cryptocurrency to their benefit as of right now. Millions of unbanked people will be able to access basic financial services as more nations accept cryptocurrency, which will cut down on poverty and spur economic expansion.
