1.7 billion adults worldwide.
225 million Chinese.
100 million Pakistanis.
42 million Mexicans.
980 million women.
These aren’t ordinary numbers. These are adults around the globe that are completely ‘unbanked’. That is, people that have no bank account.
The reasons are many: being extremely poor; cultural motives; ‘no need for it’; too expensive; KYC-AML compliance risks for banks; etc.
What is undeniable is that solving this issue is one of society’s most important goals of this century.
But…is it solvable?
And what is Crypto's role in all of it?
The feeling of being left out
According to the Inclusion Foundation, not having a bank account in the United Kingdom resulted in a loss of around 500 pounds sterling every year by missing out on discounts, special offers, etc.
500 pounds. That is a lot of money no matter the country you live in.
The richest countries in the world also suffer from the unbanking problem. Even the White House acknowledged this fact by stating that actual structures leave around 7 million Americans ‘out of the system’.
That’s 2% of the entire American population, and we are talking about the richest country in the world.
For instance, this number increases to 16% in the case of China, to 32% in Mexico, or an astonishing 45% in the case of Pakistan.
And, as always with discrimination, women are the ones with the most problems.
Women suffer the most
Unsurprisingly, women tend to be more impacted by these issues.
In many of these countries with high-level unbanked populations, women's percentages can reach up to 66%, or two-thirds of the total amount, like in the case of Kenya.
Cultural motives tend to be an important hurdle for women in many countries. For instance, banks in many countries demand women to be married to allow them to open a bank account, or even demand a co-applicant male to approve the procedure.
We must put an end to this.
Being left out hinders your capacity to grow
It is no secret that financial products are a key element of our capacity to grow our wealth.
According to Melinda Gates, co-chair of the Gates Foundation and Bill Gates’ wife for 27 years, “financial tools for savings, insurance, payments, and credit are a vital need for poor people, especially women, and can help families and whole communities lift themselves out of poverty.”
We can see this with what is probably the best example of how necessary these financial products are for society, mortgages.
Mortgages are a basic need with luxurious access requirements
Everyone should have the right to buy a house and call it home.
Of course, housing is a sparse resource, so prices tend to be high. One way to measure how high house prices are in a specific region is the Price-to-Income ratio.
The Price-to-Income ratio tells us how many salary years, on average, a household would need to access a home.
It can’t be that many years, right?
For instance, in Syria the Price-to-Income ratio is at an average of 88 years. In other words, a Syrian has to work for over 88 years of his/her life to access a home.
And that is considering they save 100% of their disposable income.
Not an option.
Of course, we are talking about a country that has been savagely destroyed by war, so one could assume that these values are fairly low in developed countries at peace, right?
Let’s look at Hong Kong.
Hong Kong, according to a 2021 study, has an unbanked population that represents 5% of its entire population.
Doesn’t seem that bad, does it?
On the other hand, Hong Kong has a Price-to-Income ratio of 43 — the fourth highest in the world — which means that an adult living in Hong Kong with no access to a bank account needs, on average, to save 100% of his/her salary for 43 years to afford a home.
Around 400,000 people with no chance of ever affording a home.
Again, not an option.
These people will never own a home there without access to a mortgage. Simple as that.
But having a bank account isn’t only about getting loans.
Opening the door to the digital world
It’s also becoming the only way to access many products, especially digital ones, which are paid with credit/debit cards, and to access them you need a bank account.
- You need a credit/debit card to pay on Amazon.
- You need a credit/debit card to pay your insurance policy.
- You need your credit/debit card to invest in stocks, bonds, etc.
While owning such financial products opens you to many new products and services, not owning one completely negates that right, being left at a complete disadvantage to the rest of society.
You’ve probably never given a second thought to the importance of having a bank account, but when you think about it you realize how absolutely instrumental it is for your personal wealth.
Sadly, the hopes of traditional finance suddenly amending its issues to eliminate this extremely unfair situation are dire.
And, although people often forget about it, Crypto was born with the vision to solve exactly this issue.
But is Crypto really capable of doing so?
Crypto says no to nobody but is used by few
Crypto was born out of a strong despise toward the numerous injustices occurring in the world.
It stemmed from a completely unselfish approach to how society should function.
Simply, nobody should be left out.
This materialized in the form of Bitcoin, the first-ever tangible approach to this concept; creating a public, decentralized database, known as a blockchain — blockchains existed already, Bitcoin’s real innovation was creating a Byzantine-Fault-Tolerant blockchain system, but that escapes the main concept of the article.
The idea was that anyone, anywhere in the world where Internet is available, could send transactions between them without having to ask permission to any entity or government.
Almost fourteen years later, how close are we to that vision?
Bitterly, quite a bit far away.
Albeit my unquestionable passion for Crypto, during these fourteen years it hasn’t been about improving society, but rampant speculation where one degenerate gets filthy rich while many other degenerates lose everything.
The technology that was born to eliminate financial inequality looks more like a digital casino.
What are we doing wrong?
The main setbacks to Crypto adoption
Crypto isn’t changing anything if nobody uses it. Although many people actively invest in it — the numbers are dropping considerably however — few really use it.
And the reason is simple.
Besides those who are looking to get a loan, there isn’t much more to do. And those looking for loans are doing so to actively invest the borrowed money in other protocols to get higher returns.
In a nutshell, Crypto is all about investing. Or even worse, trading.
Let’s be clear, utility is close to non-existent.
Besides the investing issue, there are other issues that are hindering Crypto’s growth:
- It’s hard to use.
Adding insult to injury, if Crypto is already not very attractive for the non-investing consumer, it is also wildly hard to use. The UI/UX is extremely poor, especially for users who aren’t as tech-savvy to really understand what’s going on. It’s hard and really easy for scammers to deceive users.
- Regulation uncertainty.
The KYC/AML policies — Know Your Customer and Anti Money Laundering — that came with it used to fight crime derived from the 50-year-old Bank Secrecy Act, have been quite successful to tackle crime, it also has been one of the major reasons for generating unbanking. Albeit this, in Crypto’s case, the complete absence of regulation deters a more conservative consumer to enter the space. Hence, although the actual form of KYC is a no-no for Crypto, we must welcome some sort of regulation, especially in the consumer protection area, so that people aren’t afraid to engage with Crypto.
- The technology isn’t mature enough.
This is no secret to anyone, the technology doesn’t scale, as of today, with guaranteed decentralization. We’ll get there, as projects like Avalance or Ethereum are getting close, but it isn’t proven yet. Blockchains that don’t scale resolve to centralized scaling to bootstrap — easily accelerate — adoption, but those projects aren’t going anywhere. I’ve said it multiple times and I’ll say it again; centralized blockchains are pointless. The problem is that the majority of today’s blockchains are like so, so the technology needs to continue to evolve.
- Access to the Internet.
No matter how strong Crypto’s narrative is to solving the unbanked problem, with no Internet there’s no Crypto. Although this simply doesn’t depend on Crypto’s efforts, technologies led by companies like Starlink come with the promise of democratizing the Internet to the world — adults with no access to the Internet are as discriminated, or more, as unbanked ones.
- Bootstrapping growth.
Many Crypto founders aren’t here to solve the unbanked problem. They are in the space for the money, to make it big. Utility projects that create value, albeit less attractive today, have a much more relevant role in the long term. When your Crypto project’s value is to offer high yields for investors, the value you’re adding to society is close to zero, and the majority of times you’re simply creating a new generation of rekt investors. Crypto has become more about making already rich people richer, and not about solving the world’s problems.
Crypto can and must address these issues
To me, it’s not about Crypto having the option to change the world.
It must change it. It’s imperative.
We owe it to society.
If we know we have the technology that can accomplish this, it’s our duty to embrace that vision.
Crypto's decentralized nature enables many things that are necessary for the unbanked to become part of society, to leave behind their pariah status.
- It’s permissionless; Everybody with access to the Internet can participate.
- It’s highly available; you can access your funds at any time of day and execute any transaction you want whenever you want.
- It’s anonymous; no more being overlooked for being a woman or an ethnic minority and living in a country that discriminates in that sense. Everyone’s equal.
- It’s global; no more having your wealth destroyed by your country’s currency losing its value to other currencies. For instance, by getting paid in stablecoins pegged to the dollar, you can get paid in “dollars” at any point in the world. No more geographical barriers.
Crypto has the power to change the world.
We must demand innovation that, for once, isn’t about making rich people rich but making poor people not poor. Accomplishing anything but that should be considered an absolute failure.