Unbanked Definition
The term “unbanked” refers to individuals or entities that do not use, or do not have access to, the traditional services of a bank or similar financial institution. This could be due to geographical location, lack of identification, or concerns about fees and trust with banks.
Unbanked Key Points
- The unbanked are individuals or businesses that do not utilise traditional banking services.
- Reasons for being unbanked can vary greatly, including lack of access, distrust of banks, or financial instability.
- Crypto and blockchain technologies have potential to provide solutions for the unbanked, enabling them to access financial services.
Who are the Unbanked?
The unbanked vary widely in demographic and geographic characteristics but are typically marginalized groups- individuals with low income, unemployed, immigrants, or those living in remote areas. These individuals often lack the resources or means to access basic banking services, including savings and checking accounts, credit, and loans.
What Causes Unbanked?
The barriers the unbanked face in gaining access to banking services often include a lack of formal identification, insufficient funds for opening an account or maintaining a minimum balance, high banking fees, or a purely geographic barrier- living too far from a banking service. Others simply do not trust banks and choose to manage their finances independently.
Why is Unbanked an Issue?
Being unbanked can lead to financial exclusion, which may force individuals to resort to risky and expensive alternatives like payday lenders or check cashers. Without banking services, it’s harder to save securely, access credit, or even get paid by an employer. These barriers can hinder economic growth and inequality.
When did Unbanked Become a Concern?
While the issue of unbanked populations has existed for as long as banking institutions have, heightened attention has been given in recent decades as digital finance and mobile banking technologies have advanced, offering potential solutions for the issue.
How can Blockchain and Cryptocurrency Help the Unbanked?
Blockchain technology and cryptocurrency offer potential solutions for the unbanked by providing a decentralized, accessible platform for financial activities. With blockchain, a user only needs a smartphone and internet connection to access financial services – eliminating geographical barriers and the need for a lot of traditional banking requirements. Cryptocurrencies can serve as an alternative form of money, which can be earned, sent, and stored securely without a bank.
