I believe in a better financial world. And in this world we use crypto. We often don’t realize how spoiled we are in the Netherlands with our financial system. Everyone in the Netherlands has a bank account, we can live just fine without cash, and we pay within 1 minute via bank transfer. The last time I saw a check was years ago, and a dinner out with friends we charge by the tick. As a child, you often get your own bank account opened early on by your parents. The Netherlands is far ahead on the digital financial system compared to the rest of the world, and more importantly no one is excluded from the financial system here.
By Elise.
The unbanked
But unlike in the Netherlands, much of the world is unbanked – that is, these people do not have bank accounts. The top 5 countries with the most people without bank accounts are: Morocco (71% without a bank account), Vietnam (69%), Egypt (67%), Philippines (66%) and Mexico (63%). That means that in these countries, less than 4 in 10 people have access to the banking system! Looking a little wider, we see that in the Middle East & Africa 50% of people are excluded from the financial system and in South and Central America it is 38%.
There are several reasons why people do not have bank accounts. For example, there are the costs of these services. Also, sometimes people do not meet the requirements of banks to open an account. For example, you often need to be able to deposit a minimum amount to open an account. Furthermore, not everyone has a valid ID or they live too far from a bank. Another reason is not having confidence in the banking system because they themselves have had bad experiences or do not have sufficient knowledge of how the system works.
The financial implications
The consequences of not having an account are greater than you might think. This is because it is not only inconvenient not to have a bank account, but impossible to save and invest to build your wealth. Money is kept at home or with friends, where it is easily lost and spent. Or it is kept on prepaid cards on which there is hardly any interest, so it does not grow. It also forces people to borrow money from parties other than banks, sometimes unreliable parties and with higher interest rates. Not having a bank account leads to negative financial consequences. These consequences, combined with the high unbanked numbers, are things to be wary of.
So when I say I believe we can use crypto to create a better and fairer financial world, I am thinking of the unbanked and not the Netherlands. Crypto allows the unbanked to create a wallet, make Peer-2-Peer payments, get interest on their savings (strike) and perhaps make an investment themselves. All they need is a cell phone and internet. No bank to stop them in this, no government to determine their spending and no Westernunion to pocket a large portion of the earned money sent home.
Looking at crypto adoption growth rates, the top five countries with the largest adoption are Vietnam, India, Pakistan, Ukraine and Kenya. Countries from the poorer areas of the world. For these countries, the desire to protect themselves from inflation, low transaction costs (including for payments across borders) and the desire to be able to build wealth seem to be leading the way in major crypto adoption. Although it seems there are other reasons for getting into crypto in Vietnam, namely a culturally specific affinity for gambling and little access to other investment options such as ETFs.
A new world?
Perhaps we can draw a parallel with the skipping of landline telephony in some countries. Whereas in the Western world we started with a fixed telephone network and now decades later we no longer install a fixed telephone but do everything via mobile, the entire fixed telephone network has been skipped in large parts of Africa. They immediately switched to mobile telephony. Perhaps we will also start to see this in countries with large amounts of unbanked. When I was in Botswana in 2014, electricity bills were paid by buying call minutes with cash (remember the old days?) and sending them via text message – without the intervention of a bank or bank account. Are we now going a step further and seeing this happen with the skipping of bank accounts and opening a wallet for Lightning payments?
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