Anton Dzyatkovsky, co-founder of MicroMoney, explains how blockchain technology and increasing internet penetration into previously untapped regions can help bring previously inaccessible financial services to the unbanked.
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I believe that the evolution of blockchain-based infrastructures and active Internet penetration in emerging markets enable the financial industry to provide services to a much larger audience than before. I have to put it simply — there is now an open path to a completely new market niche for lending services, a segment with large potential which, experts say, will continue to grow for the following 5-10 years at least.
The point is that social loans our company provides in emerging markets are most popular among people with an income average for the region but without any bank account. Together they make a very large and promising market. Currently, there are over 2 billion unbanked people in the world, and most of them live in the emerging countries. And it would be absolutely incorrect to state that unbanked people are poor — most of them have stable jobs, average salaries, families and even a private property sometimes.
A significant part of this audience also runs an own small or street business. Most of these people are still unbanked because they operate only with cash — receive a cash salary, make all business in cash, and have cash savings, which makes them not easy to assess and thus not enough profitable for classic banks. Most banks have high requirements for opening private bank accounts or approving credits, making it completely impossible for such people to get any financial services.
Ushering in the Age of Digital Finance
Meanwhile, the age of digital finance began. Some large market players all over the world have already realized that the unbanked is a very perspective and vast audience. Now they are trying to work with these people, offering new or online-based products. In the USA, Walmart’s GoBank offers low-cost checking accounts targeted at people who don’t use traditional bank accounts. Amazon launched Amazon Cash which allows customers to go into retail stores and put cash onto their Amazon accounts so they can shop online without even using a credit card. Chinese giant Alibaba Group has already shown interest to lending services and promotes its own online financial service, Alipay. In Kenya, M-Pesa uses a simple text message allowing people to send and receive money. In the United Kingdom, three local banks — Atom Bank, Monod, and Tandem — in 2015 got the official permission to fully switch to mobile technologies to meet their clients’ needs.
International companies operating worldwide also follow the trend. Our company, MicroMoney, is another example as we are a lending services provider based on blockchain technology. We offer customers to get the loan services completely online, i.e. not only by completing the application form through a mobile app but also by assessing a customer’s creditworthiness, evaluating a credit rate, getting the necessary approvals and finally sending the money to borrowers — straight to their e-wallet.
Nevertheless, there is still a lot to do in the online finance field. While in the countries, members of OECD, 94% of citizens have bank accounts, most people living in the developing countries have never used any financial services at all.
According to the information provided by Findex and the International Bank, only 35% of adult population in African countries to the South of Sahara have a bank account, even less in the Middle East — only 14%. Taking this into account, the market statistics in the emerging markets get really interesting: along with the high percentage of the unbanked or underbanked population, there is high penetration of the Internet and mobile services. For example, in Africa, 80% of the population does not have a bank account but 63 of 100 people use mobile phones. Pakistan showed 185% of the growth rate of mobile broadband users but 100 million Pakistanis are still unbanked.
In 2017 China has 731 million Internet users (53.1% of the overall population), 95% of them connect from mobile devices. In India, the unbanked population would be the world’s 7th largest and country’s Internet market in 2015 showed 51.9% growth. As reported by KPMG, mobile banking segment of India and China grows by 60–70% every year. At the same time, 21% of India’s population is still unbanked.
In general, there are now over 7000 microfinancing organizations that serve over 16 million people in emerging countries, according to the statistics of the International Bank. So, it takes only to compare this number with the above-mentioned 2 billion to understand how large is the audience that no bank or financial organization has ever worked with, except the alternative fintech projects.
Is the new ‘crypto-economy’ the answer to bringing important financial services to the unbanked business owners and consumers of the world? Let us know in the comments below.
Images courtesy of Shutterstock, MicroMoney