How Blockchain Could Bring Financial Services to the Poor
Digital disruption could help to ensure that everyone has access to essential financial services.
In the age of the application economy, it is easy to assume that everyone lives their lives through a virtualized web of online transactions. But you know what they say about assumptions. Plenty of people still live, work and play very much in the real world. There are times when this is an understandable preference—many still prefer print to eBooks, for example. But in other instances, it can be inconvenient, even unsafe.
This is certainly the case when it comes to managing your money. Luckily, blockchain technology may be coming to the aid of people still stuck dealing with cold, hard cash.
The erosion of cash’s place as the main way to pay for goods and services has been going on for decades, of course. Credit and debit cards have made it unnecessary in many situations and more recent technologies such as PayPal, Apple Pay and Square have lessened the need for paper money even more. But some still prefer cash—particularly older people, as countries that have tried to move to a cashless economy have found to their cost.
For some, favoring physical cash over virtual transactions is more of a predicament than a preference. It should come as no surprise that those who live in dire poverty tend not to have bank accounts and must conduct all their transactions with cash. But it’s also true that many of the working poor are in the same predicament. It’s estimated that two billion people worldwide do not have access to formal financial services.
Using cash exclusively is one of the reasons the poor are at a greater risk of being robbed (or otherwise ripped off) and remain alienated from the mainstream economy. But for people who may live on just a few dollars per day, there are real practical and psychological barriers to opening a bank account—in every sense, banks aren’t designed to help people stuck at the bottom rung of the economic ladder. Could digital disruption help to bring the barriers down?
Consider this: In many of the world’s poorest areas, any given person is significantly more likely to have a cell phone than a bank account.
Payments for Everyone
Crypto currencies like Bitcoin have done a good deal to disrupt conventional notions about how money works. And it seems possible that Bitcoin’s key foundational technology—blockchain—could play a significant role in giving low-income individuals access to financial services. As recently reported by MIT Technology Review, the Bill & Melinda Gates Foundation is working on a modified version of blockchain that aims to do just this.
This goal is to help governments and central banks develop a framework for creating national digital payments systems anyone can use. This is surely one of the most ambitious practically proposed uses of blockchain to date and it will be interesting to see if the players involved—large governmental organizations—are able to maintain the culture of innovation and agility that will be required to deliver the types of services proposed by the Gates Foundation.