Financial inclusion: Cryptocurrency and DeFi for the unbanked
According to data from the World Bank, there are an estimated 1.4 billion unbanked people worldwide in 2023.
As the use of cash decreases and digital payments increase, many unbanked people with access to mobile technology have instead chosen to explore the offerings of cryptocurrency and the DeFi space.
There is limited data on the interest of unbanked individuals in cryptocurrency. However, some reports suggest that digital currencies are already playing a significant role in financial inclusion for the unbanked, as there is no requirement to have an active bank account and can be accessed via a mobile phone.
The reasons for this are many, with experts citing limited financial literacy, lack of proper documentation, high costs of financial services, lack of trust in financial institutions and limited financial infrastructure in certain areas. In addition, marginalized populations may face discrimination or exclusion from the formal financial sector.
The DeFi space – alongside its democratized platforms and numerous currency options – has therefore begun to provide an alternative financial space for people who are disenfranchised and unable to participate in traditional banking markets.
A divided economy
Speaking of the changing market, Sahar Salama, CEO and founder of full-service mobile payment platform TPAY MOBILE notes that increased digitization of the economy creates a divide between technologically savvy and disenfranchised groups. She says this requires appropriate government policy so that everyone can benefit from the new opportunities in the digital world.
“As our society becomes increasingly cashless, some advocacy groups have raised concerns about the inclusion of vulnerable groups in the digital economy.
“While these concerns are justified and it is true that not enough is being done to include everyone in the digital economy yet, the solution should be a collaborative one involving governments, regulators, financial services and fintech providers all playing an active role , rather than a rejection of the concept of cashlessness.
“For a cashless society to be truly successful, digital payments must be accessible and appealing to everyone.”
New opportunities for providers of financial services
Reports suggest that an estimated two-thirds of the world’s unbanked – that is around one billion people – use their mobile devices for transactional purposes.
Salama points out that the use of mobile technology can increase access to financial services by reducing barriers such as the need for physical infrastructure and documentation. As a result, mobile financial services have the potential to greatly increase financial inclusion for the unbanked population.
In addition, cryptocurrency transactions can be faster and cheaper than traditional banking transactions, making it an attractive option for individuals in developing countries for whom access to traditional financial services may be limited.
