Financial products and services propel global development and alleviate poverty. But, many people around the world still lack access to basic financial services, making it difficult to invest in their health, education, and entrepreneurship.
Recent advancements have been fueled by an emerging generation of financial services available via mobile phones and the Internet.
Decentralized digital currencies backed by blockchain technology have sparked a lot of discussion in the tech and financial communities, and their promise for enabling financial inclusion is being explored worldwide.
Consider living without access to the simple financial services that the majority of us in developed countries accept as normal: no ability to open an account, hence no ability to secure a debit or credit card, a business loan, or any assistance to help you get through a rough month. Doesn’t it sound difficult?
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Bank accounts are, in actuality, the first stage of financial inclusion. Financial inclusion is defined as institutional players providing adequate, affordable, and accessible financial goods and services to disadvantaged and low-income people in a fair, consistent, and transparent manner. Individuals can use accounts to save money and prepare for financial inclusion.
Since transactions are verified by the consensus of various users, blockchain eliminates the need for a centralized system.
The disruptive nature of blockchain presents prospective prospects for the global payment environment to be more transparent, effective, and frictionless by combining the openness of the internet with the security of cryptography.
Blockchain has the ability to provide a quicker and more secure way for everyone to authenticate information and create trust. Let us examine how blockchain technology might help to drive financial inclusion.
Blockchain technology has the potential to significantly improve financial inclusion for the unbanked. Below are a few examples of how it can assist:
Financial services accessibility
Access to financial services like banking, loans, and insurance is one of the most significant difficulties confronting unbanked people.
Blockchain technology can assist by offering a secure, decentralized platform for financial transactions, allowing the unbanked to access financial services without requiring a traditional bank account.
Identity in the digital age
Blockchain-based digital identity solutions can assist the unbanked population in creating a safe and verified identity, which is frequently required for access to financial services. This can aid persons who do not have the proper papers to confirm their identification.
Remittances
Cross-border remittances can be made faster, more inexpensive, and more safe using blockchain technology.
This can assist the unbanked population in gaining access to funds from relatives and friends in other nations, as well as investment opportunities.
Also read, How Web3 Can Unlock Financial Inclusion for Africa’s Economic Potential
Blockchain speeds up the opening of accounts
Blockchain technology can help to create a decentralized method of identity management as well as manage social and financial rights.
Individuals can use a smartphone to take a selfie and record a video of themselves making various facial expressions.
Furthermore, blockchain-powered solutions may aid in the detection and prevention of illegal conduct and activities, thereby improving Know Your Customer (KYC) endeavors and decreasing the amount of time and costs associated with assembling personal information, which is a time-consuming and costly process for traditional financial institutions.
Moreover, blockchain’s immutability and transparency may allow the generation and secure storage of clean and up-to-date consumer data, resulting in better operational efficiency, increased confidence, and a decrease in labor-intensive data collection, so they get to have an account without going to the traditional building of a bank.
Microfinance
Individuals and organizations can get small loans through blockchain-based microfinance services independent of their credit background. This can assist unbanked people to acquire credit and gain access to previously unavailable financial services.
Ultimately, blockchain technology has the ability to transform the financial industry and deliver financial services to unbanked people.
There are still obstacles to overcome, such as legislative restrictions, a lack of infrastructure, and a lack of faith in technology. Nonetheless, the potential benefits are substantial, and continued discoveries in this field are worth monitoring.
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