Despite being the driving force of today’s economy, the traditional banking system has yet to adapt its mechanisms to the growing population and customer needs. That’s why it fell behind with financial inclusion, leaving many unbanked and affecting government policies.
Global financial inclusion has a massively important role in the changing technology landscape. It supports trust between customers and digital products and can set a quality standard for how financial services and products perform.
Luckily, blockchain technologies seem to be the solution to pushing for global financial inclusion, as its decentralized networks offer anyone across the globe access to cryptocurrencies. At the same time, blockchain supports fast payments and innovative solutions for local needs, such as the World Chain. A permissionless and open-source network that leverages the Worldcoin price for paying gas fees, benefitting from equitable voting systems, and paying for in-game assets.
Worldcoin is one of the numerous blockchains contributing to worldwide financial inclusion, but let’s see how they do it.
Blockchain eliminates the barriers to opening a bank account
Although opening a bank account is a matter of minutes in some countries, many citizens still cannot own one due to a lack of proof of address or a minimum deposit. The unbanked might not even have access to traditional financial services, which can happen in less developed countries.
Blockchain can easily solve this problem as it doesn’t require users to provide such information to access their funds. One innovative business has already approached the technology and blended it with biometric data, such as face recognition, as a requirement for creating a profile.
This blockchain-powered solution also doesn’t require an email account or a valid form of ID since transparency and immutability enhance safety and security. After all, making cryptocurrency payments globally requires little to no information about the individuals and can be done anonymously.
Blockchain helps build trust between users and companies
The lack of trust in financial services firms can be tracked down to inflation and market volatility, which again proves how unstable the world economy is. However, brands seem to lack an understanding of customer trust or place it on the same level as stakeholder trust, which are different aspects.
Blockchains are not subject to a single point of authority but instead rule based on a consensus protocol that allows worldwide nodes to safeguard transactions through mining, staking, or other technologies. Therefore, the decentralized platform relies on global contributors who aim to build a trustworthy ecosystem. In some blockchains, the entire network can eliminate the problem in one sitting, even if one or two nodes are corrupt.
Blockchain offers an affordable alternative to processing payments
Global and local payments often use expensive and time-consuming processing techniques, leaving the end user to pay additional fees that can be more or less affordable, depending on a long list of factors. However, blockchain can tackle this problem, and many ledger solutions provide inexpensive transaction fees for global payment users.
This can happen as there are no third-party intermediaries involved in the payment process, since the blockchain is supported by technology and numerous nodes across the globe. Some blockchains are known for their lowest transaction fees on the market, including Nano, Stellar, and Ripple, one of the most efficient and affordable decentralized ecosystems.
How can we implement blockchain in the real world?
Several steps must be accomplished for unbanked nations to access blockchain technology. A thorough plan must be developed to settle an implementation model and assign resources for the plan and protocol to be successful.
Local businesses may be able to access blockchain technology more easily based on their needs and capabilities, enabling the brand to offer its products and services to the end user. Using blockchain, companies can use smart contracts for money transfers, personal identity security, and healthcare, enabling faster and more efficient payments.
Generally, there are five steps to be completed for implementing blockchain:
- Identifying the blockchain that fits the use case;
- Develop a proof of concept;
- Choose a blockchain whose consensus and architecture serve the proper purpose;
- Design the smart contracts needed;
- Monitor the network and assess updates when required;
What are the challenges of introducing blockchain into the real world?
When it comes to using blockchain in the same way we use the cloud, we have yet to develop the adequate architecture to adapt it or settle the learning curve for developers to acquire the proper skills. While there are a growing number of blockchains in the decentralized ecosystem, each lacks certain features that make it more difficult to use them adequately.
For example, blockchain energy consumption might be an issue, considering how the world is trying to tackle climate change. Bitcoin, for example, is known to be the most wasteful cryptocurrency, as mining it requires extensive computational power and expensive hardware. Therefore, green blockchains, such as Cardano, Algorand, or Tezos, are taking the lead on the market.
Another problem concerns interoperability. Blockchains should be able to communicate seamlessly without interfering with data safety or congesting the network, but achieving this high level of interoperability is challenging. For now, blockchains are building bridges through which they can send and receive data safely.
On the other hand, even if technology allows communication to happen, user education and adoption regarding the usage of multiple blockchains are another issue. Since digital literacy isn’t adequately spread across the globe, it would take some areas far more time to understand how blockchains work than others, creating an adoption delay. In addition, someone has to implement and maintain the blockchains, meaning governments need several teams to handle the introduction of blockchain across sectors and industries.
Do you think blockchain is the solution to global financial inclusion?
Financial inclusion drives economies to thrive, but some countries lack it for various reasons. Unfortunately, their citizens suffer the most as they remain unbanked, which is why blockchain could be the ideal solution to solve this. By having more control over their assets, people could secure their own wealth and better contribute to the economy rather than be limited by centralized banking services.