Banks are often regarded as a necessary evil. Even though they make billions of dollars every year, they still offer services without which the modern global economy wouldn’t be possible. For most people, owning a bank account is natural and common, making their daily operations possible.
Unfortunately, some people don’t really rely on banks, thus the nickname unbanked. Approximately 2.5 billion people aren’t unbanked because they chose to. Instead, various legal and natural obstacles do not allow them to have a bank account, even though that would make their lives much easier.
Why Can’t Some Countries Have a Bank?
Believe it or not, some countries don’t have a central bank. Some, like Monaco, are actually rich micro-states that made a conscious decision not to have a central bank. Others, such as Nauru and Palau, are too remote and small to have a bank, creating territorial obstacles that prevent them from having a bank. At the moment, Panama is a country without a central bank and with the highest number of people, currently counting around 4.4 million residents.
But not having a central bank and not being able to open a bank account are two different things. Many poor states have central banks, but banking services are limited to the rich minority.
Why Do Some Locations Not Have Access to Banking?
How come more than a quarter of the population still doesn’t have access to banking even though most countries have banks? You’ll find several answers to that question.
First, banks choose not to operate in many areas simply because the overall financial situation is unstable. Perhaps an ongoing war prevents that, or a terrorist organization controls the area. Sometimes, private banks simply refuse to operate in certain areas because it’s not viable for them, as the population is too poor.
In many developing countries, the population doesn’t have enough financial education to understand the importance of banks, including all the services they offer.
The results are quite disastrous when you combine all those reasons, and an urgent solution is needed.
Could Crypto Be the Answer to Banking the Unbanked
Cryptocurrencies can be the answer to the current problem with the unbanked, as they effectively don’t need a third-party (bank) to process money transactions. Users can easily send and receive Bitcoin anywhere in the world.
Still, this fact alone is not enough. Many individuals need to make legitimate cross-border transactions using official financial institutions. Therefore, it’s safe to say that the answer is a combination of crypto and traditional banking systems, and some crypto projects, such as Ripple, are already working on this big time. Ripple is joining forces with banks around the globe to make cross-border transactions quick, easy, and affordable.
Cross-Chain: Main Challenge for Crypto at the Moment
Crypto is still not close to banking the unbanked, as it needs to solve particular problems first, the most important being cross-chain interoperability. It simply means that different blockchains can work together and help you make transactions of value and information between different blockchains. In fact, the lack of cross-chain interoperability is much similar to the lack of good cross-border payment options, except that we’re closer to solving the former.
Many projects already have cross-chain interoperability, such as t3rn, which focuses on interoperable smart contract execution, allowing smart contracts to be executed on different blockchains. It also features a smart contract registry where developers can submit their contracts and get paid whenever someone uses them.
Banking the unbanked and giving everyone worldwide an equal chance to enjoy the benefits of financial institutions should be a priority in the upcoming years. Of course, banks alone may not be able to achieve that, but blockchain has opened many new possibilities, and some of the most competent people in the world are currently working on solving this problem.