Regardless of your perspective on cryptocurrencies, whether you see them as the future of finance or just a passing trend, it’s hard to ignore their significant presence in the financial realm, especially with their current market capitalization estimated at $US 2.5 trillion. However, today we’ll explore the intersection of cryptocurrency and financial inclusion: Is it too risky to adopt or too compelling to disregard?
In a world increasingly shaped by digitalization, achieving financial inclusion remains a pressing challenge. Billions of people worldwide lack access to essential financial services, effectively excluding them from participation in the global economy. According to the World Bank, around 1.7 billion adults globally are without access to traditional banking services. This exclusion often stems from factors such as insufficient infrastructure, geographical remoteness, and lack of documentation.
Unfortunately, this financial exclusion perpetuates the cycle of poverty, restricting opportunities for savings, investment, and access to credit for education or entrepreneurship. However, there have been notable strides in financial inclusion through the adoption of mobile banking, digital payments, and electronic wallets, particularly in regions like Africa and the Middle East, where telecommunications companies dominate the digital wallet landscape.
For instance, OPay, launched in 2018 in Nigeria, has become Africa’s most widely adopted national e-wallet, serving 35 million customers with a range of financial services including mobile payments, money transfers, bill payments, micro-loans, and point-of-sale (POS) services to merchants. Other significant players in the region’s e-wallet market are showcased in the visual below.
Additionally, these e-wallet providers have bolstered financial inclusion by partnering with international money transfer services like Western Union, MoneyGram, WorldRemit, Remitly, and Ria to facilitate cross-border transactions.
Now, let’s consider how cryptocurrencies offer a unique approach:
- Borderless Inclusion: Cryptocurrencies transcend geographical boundaries, enabling anyone with a smartphone and internet access to participate in the global economy and access financial services from anywhere.
- Quicker and Lower Transaction Costs: Cryptocurrencies typically offer lower transaction costs compared to traditional banking services, making financial transactions more accessible, especially for the unbanked.
- Secure Technology: Blockchain technology enables secure and transparent financial services. Decentralized applications (DApps) can provide savings, lending, and payment solutions to those excluded from traditional banking systems.
While there are many potential benefits of cryptocurrencies for financial inclusion, several challenges must be addressed:
- Regulation Compliant: Cryptocurrency regulations vary globally, posing challenges for consumer protection and innovation. Finding the right balance is a complex task for governments and regulators.
- Digital Literacy: Understanding how cryptocurrencies work and how to secure digital assets is essential for harnessing their benefits. Education and support will be crucial.
- Digital Access: Uneven access to the internet and smartphones in many regions pose barriers to financial inclusion. Bridging this digital divide is essential for broader adoption.
Over the last few months, Hawksman Technology has witnessed a significant increase in the commitment of countries, organization’s, and individuals to enhance regulatory, legal, and compliance measures to ensure transparency and compliance in cryptocurrency transactions. As institutional adoption of digital assets gains momentum, the emphasis on regulatory agendas persists. We remain optimistic that the momentum toward financial inclusion will also be sustained.
