In bitcoin’s early years, using the blockchain on a large scale was just as strong a technology as a philosophy and belief in a new decentralized economy that would serve the masses. Hence, it’s no surprise that many startups in the space see that blockchain has a fitting case for financial inclusion to provide better, faster and cheaper financial services to those who are outside or heavily burdened by their local formal financial systems.
Underserved customers won’t see benefits to using bitcoin for its inherent coolness; rather, they need it to simply and easily address a pain point or make their lives better. How can the blockchain begin to have real meaning in the lives of the two billion excluded individuals around the world?
There are a few ways we believe blockchain can help revolutionize access to financial services for the base of the pyramid in the near future.
The cost of remitting money averages 8.4 percent globally, driven in large part by the legacy brick-and-mortar distribution networks and multi-bank settlement chains of incumbents like Western Union and MoneyGram.
Using the bitcoin blockchain as a back-end to transact local currency provides a clear way to ensure that the customer can feel comfortable with the product, while also receiving the cost and technology benefits of the blockchain technology.
Using the blockchain in this fashion will not only lead to more value accretion to remitting customers, but it will also be the kind of radical value proposition improvement that will be required to attract customers and break them from established habits around sending and receiving money.
Similarly, the blockchain can be used in remittances to enhance pricing transparency and provide better transfer security, as well as be used as an on-ramp for other technology driven financial services. It’s important to also consider that while blockchain can help lower costs and smooth transactions, it alone does not make a company poised for complete success -– there are other huge components of a remittance startup that need to be taken into consideration, such as cash-in/cash-out points and a unique customer acquisition strategy.
Property rights have long been a source of conflict and pain for many lower-income individuals. Formalizing property and expanding formal information networks for the base of the pyramid allows low-income property owners to enter the formal financial system and generate collateral for financial products; it also provides legal protections and visibility in the local formal economy.
Similar to property rights, many base-of-the-pyramid individuals do not have access to traditional financial services because they lack verifiable identification. Governments and individuals alike understand the complex nature of identification, and while some low-income individuals prefer to remain anonymous, the systematic and individual costs of doing so remain very high. By using the blockchain, individuals can receive a digital identity for transacting value nationally and internationally with relative ease. For example, Bitnation is using blockchain to help solve the refugee identity crisis in Europe. Their system currently helps Syrians get an “emergency ID” in order to cryptographically prove individual identity and family relationships.
Similarly, at Onename, usernames are created within an open namespace and user data is embedded directly into the blockchain to help individuals who want to voluntarily identify themselves, even when local governments make it difficult to do so. This would give those typically excluded from the financial system a way to potentially open their own bank account, send money across borders and even apply for loans. Users can voluntarily identify themselves via the blockchain, and may be granted access to health care, social services, job opportunities, and more.
In addition to the above possibilities, we know there are more great ideas out there, and these are just a few as to how the blockchain could support the underbanked around the world.