Introduction.

According to the Global Findex Database, around 1.7 billion adults have remained unbanked. All of them do not have access to a bank account. In countries like India and China, which show much high account ownership, still, most of them have an unbanked population. According to statistics, China has the largest unbanked population leading India, Pakistan and Indonesia.
Despite, so much development and technology advancement, still, a big number does not have a bank account and have no access to financial services. Hence it is really important to address such issues and search for some solutions to banking the unbanked people with technologies.

In this blog we will answer what are the major reasons, and how can we bank all such unbanked people. Before answering such questions let us discuss who all does not have a bank account.

Infographic: India has second-largest unbanked population in the ...
banking the ubanked people img: times of India

Who All are Unbanked?

In most of the countries, and among all such people, women does not have a bank avvess. According to statistics by global findex, 980 million people do not have bank accounts and 56 per cent of people are adults.

Most of these adults belong to poor households and around a quarter of unbanked people belong to the poorest houses and 20% of people live in the richest houses. According to the statistics, A conclusion that most of the adults do belong to either the richest household or poorest household. There could be several reasons why people don’t have bank accounts. Hence in further sections, we will discuss several reasons.

Reasons, why People are unbanked?

Globally, around 31 per cent of adults in several countries are unbanked. And, Various factors have played a role in keeping people unbanked. Well, the most common reason is lack of money hence, most of the people are without bank accounts. Whereas most of the people do not feel the need to have bank accounts.

Cost is also one of the factors, as accounts are too expensive to maintain. According to statistics, In Latin America, most of the people do not open the account as it is very costly to maintain it.

Distance plays a major role. Most of the people do not go for bank accounts as they do not have any financial institutions near them. Hence it becomes difficult for them to access such facilities.

And the most primary reason is distrust. Most of the people do not trust financial services. According to global statistics, 16 per cent of people do not have bank accounts due to such reasons. Out of all such reasons, 6 per cent of adults do not have accounts due to religious concerns.

How can we bank the unbanked people?

Most of you must have heard about financial technology and blockchain. Both of them are promising solutions that could help us to bank the unbanked people. Blockchain technology is a decentralised and distributed database which stores all the data immutably. Blockchain could help us to bank the unbanked people. And With just a small application in mobile and an electronic wallet, most of the people can store money virtually and transactions.

How blockchain could revolutionise the whole financial structure? Blockchain network is a decentralised network, which does not have any centralised authority to look after such transactions and validate. Hence one does not need to trust any authority for conducting their transactions further. Unlike the conventional financial system, all the transactions in the Blockchain network are without middlemen. Hence only the sender and receiver holds the transaction.

And With the distributed nature of the database, all the nodes or network members can have access to it from any corner. With just a single click on the application, people can do transactions from anywhere and anytime.

All the transactions stores in a blockchain network are immutable, hence it cannot be edited and tampered. All the data stores in the blockchain and completely secured and timestamped.

Hence Blockchain technology is a promising technology that could help us to bank unbank people.

how blockchain can be useful and how it works?

Many unbanked people do believe that there is a huge cost involved in every financial service they do. And it is completely true. Most financial institutions charge hefty amounts of fees for conducting bank transactions. But it is not in the case of the blockchain-based financial system. All the transactions are directly conducted between the sender and receiver have no fees are involved.

Also, blockchain solves the distance issue that most people face for assessing financial services. With Blockchain-based financial infrastructure people do not need to travel a lot. Blockchain financial infrastructure would have a mobile application and an e-wallet, which could be majorly useful for conducting transactions.

Many issues like transaction time and international transactions reduces with the use of blockchain. blockchain is a decentralised and distributed network, anyone can join a network from anywhere around the world and do transactions. All such transactions take very less time to validate and transfer the amount. Also, with its distributed nature, people from anywhere can do transactions.

All the transactions are validated by the nodes in the blockchain network. Hene a blockchain-based financial infrastructure would reduce the cost of setting up the financial institutions and hiring employees. It will be completed for the people and by the people. Every transaction would or without the intervention of any third party. Hene it will give people more freedom.

Blockchain in finance would give rise to decentralized finance.

Decentralised finance would completely transform the current financial system. hence, no third party controls financial infrastructure. Also, it will give people more freedom to conduct transactions.
Such infrastructure would involve several stable coins cryptocurrencies for making the transactions. It will be interoperable.

Several multinational companies like Facebook are working to build such financial infrastructure based on the Blockchain. A project called Libra is working on building a decentralised financial infrastructure. Even China has launched a digital currency.

Conclusion

Blockchain in financial infrastructure would make people independent and give more freedom. Using Blockchain, financial infrastructure would bring everyone together, give rise to more globalisation and cost would be less . All the inflation caused due to more money printing would reduce since digital currencies would be in fized supply. Also, the best facility of decentralised finance is everyone would be able to access and bank the unbanked.

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