Billions of people around the world have no access to banks or even basic financial services. They are excluded from the global economy and sentenced to a lifetime of grinding poverty simply because they cannot access services that many in the developed world take for granted. Now, with Web3 and decentralized finance platforms, we finally have the chance to provide true financial inclusion for everybody.
Many of the crypto industry leaders are stepping up to help push for more financial inclusion and regulatory reforms that provide broader access. Binance CEO Richard Teng explains their company vision for the future: "We are committed to promoting the adoption of Web3 and blockchain technology to foster financial inclusion and reduce transaction costs, while working closely with regulators to establish a globally harmonized regulatory framework that balances innovation with consumer protection."
A World Bank study showed that 1.4 billion people had no access to any form of banking in 2021, and another 1 billion had no real access to financial services.
While most of these people lived in the world's poorest countries, recent Federal Reserve figures showed that 6% of Americans have no bank account. So, this is a truly global issue. With no ability to borrow, invest, or save, these people are stuck in a cycle of poverty that can stretch for generations. However, Web3 and Decentralized Finance can provide the answer and change the whole concept of financial services.
The Smartphone Solution
Anybody with a smartphone and an internet connection can get a basic cryptocurrency wallet and start to save. They no longer have to suffer the traditional banking institutions that would simply refuse them an account or make it so complicated that they never applied. A lack of a home address, paperwork, a minimum deposit, or basic literacy skills could all keep people out of the traditional banking system. None of these are obstacles to getting a crypto wallet.
Web3 technology takes the intermediaries like banks and payment processors out of the equation. Cheap, easy, and instant peer-to-peer transactions are now available to anybody with a smartphone. For the unbanked, who had to pay extortionate fees to send a small amount of money to family members through old-school remittance and payment service providers, this is a revolution in itself.
Now, there are several initiatives from the likes of Mastercard and CrossFi to give people debit cards linked directly to their crypto wallet, which means they can spend those tokens in the real world and join the digital economy. The rinch wallet and card also support Google Pay and Apple Pay.
A Total Banking Replacement
We might not think of shopping on Amazon as a step forward, but for those many people, the chance to join the world of e-commerce and save money on purchases is a game changer. Of course, a digital wallet and a linked fiat currency card that works online and in stores is a complete system that replaces an old-world bank account and brings the disconnected back into the financial fold.
It also puts the user in charge of their money and asks some real questions about the old banking system. Digital wallets and decentralized applications mean that people who never had the chance can now store, transfer, and steadily grow their wealth without the interference, approval, or crippling fees of traditional financial institutions.
Platforms like Celo were set up purely for mobile users with low-grade internet connections. It also simplified transactions for less web-savvy users, making transferring crypto as easy as sending an SMS.
Loans Are the Future
Storing and sending money is a huge step in itself, as this gives the unbanked access to savings and small loans within their own network of family and friends. But Web3 and DeFi can do better than that. For true financial inclusion, the poor must have access to personal or business loans to help pull them out of poverty.
A big part of Celo's mission is to enable global microlending to individuals and small businesses in developing nations through lending pools like Moola Market or Ubeswap. Borrowers can access tokens deposited half a world away, but the whole process is mediated by smart contracts, and there is normally collateral cover. It's a simple way for crypto holders to help those in poorer nations while earning interest on their cryptocurrency, but the collateral required is still a barrier.
Ethichub funds small-holding farmers in the Third World. Lenders in wealthier countries can offer short-term loans or more significant amounts to help farmers in poorer countries access essential funding for equipment or to survive a lean period. The borrower gets the funds they need at a lower cost than an often unattainable bank loan, and the lender gets a solid rate of return and the chance to contribute to the global economy in a new way.
In Colombia, Quipu Bank has employed Web3 technology to provide credit to women-owned microbusinesses and help them make a living. Goldfinch also supports micro-loans without crypto collateral. It uses a system of trust that can go wrong, but on the whole, it manages to provide funding to those most in need and give the poorest in the world a chance at a better life.
Wrap Up
These are massive steps in the right direction that would be impossible without Web3 and DeFi platforms. Eliminating banks and allowing small transactions with minimal fees can change the world on their own, and the addition of lending pools and micro-loans to give liquidity to the unbanked and financially disadvantaged people in the world can change lives and whole societies for the better.
With Web3 technology and DeFi platforms, we have one of the greatest opportunities in history to take on global poverty and financial exclusion. It's a chance to bring the poorest people in the world back into society and to give them a chance at a better life. That's a chance we have to take.
