
The world is becoming more centered around financial technologies. And yet, there are millions of people who remain branded by the term “unbanked”. The World Bank Findex states that around 1.7 billion adult people remain unbanked, meaning with no access to financial services.

Despite the fact that the sad statistic has been gradually decreasing since 2014, that does not mean that the figure representing lost financial potential among the global population can be disregarded. The justification for the problems of the segments of the world population who do not have access to banking services are many. And yet, all of them derive from socio-economic factors.

The How And Why

First and foremost, the economic situations in many countries of Africa and the Middle East are the main contributors to the problem of the unbanked. The next region most affected is South East Asia, where financial inclusion is more governed by social and geographic factors, such as low levels of education and poor infrastructure development.

The problem of the unbanked is not limited to individuals but has a direct impact on the economies of countries. The losses incurred by an economy, such as one of the African countries, are significant if more than 50% of its population does not have access to banking services. The loss of economic turnover and potential for investment is impossible to underestimate in such a dire scenario.

The inability to receive direct deposits is the first problem that the unbanked face in their omission from the financial chain. With no ability to have deposits in banks, even working individuals will not be able to transfer funds abroad or even inside the country to their families.


Lack of access to lending tools is the next biggest problem for the unbanked. Social factors, such as poor literacy rates are an important factor in this regard, as banks are unwilling to deal with strata of the population who have low education rates and are not regarded as reliable clients. The same inability of receiving loans imprisons individuals in their social sectors and prevents vertical or even horizontal social movement. It is easy to imagine the loss of economic potential if people do not have access to loans, or even micro-loans, and are unable to open businesses or acquire property.

The inability to store credit histories is another severe problem. With no records of their financial competence, individuals do not exist for the banking system in general and are not eligible for any loans or any of the financial instruments that require credit history matches or reliable sources of information about individual finances.

The lack of fast money transfers is a severe issue for the unbanked, who have no means of sending funds abroad via bank accounts and are forced to resort to transferring services. When an individual is working to sustain their families, having to pay high commission fees for funds transfers is a serious impediment to the financial improvement of situations for households.

The end result of the combination of such effects of the presence of unbanked strata of the population is the growth of poverty and economic stagnation.

With the global economy being increasingly focused on inclusion and technological instruments for financial operation, it is not difficult to forsee the colossal impact the presence of the unbanked is having on the global economy at large. With over 1.7 billion people having no prospects of financial operations, governments are losing economic and human potential alongside tax revenues.

How Does Blockchain Fit In?

Blockchain technologies are some of the most promising instruments in eradicating the problem of the unbanked. The inherent characteristics of the technology exclude the possibilities of fraud that banks are so concerned about. The ability to process immense amounts of data and provide instant transactions at low costs are also important factors for the unbanked and the organizations servicing them.

A report by Deloitte states that blockchain could have the potential to facilitate remittances for migrants seeking to transfer small amounts of money overseas. The report states that technology has the potential to eliminate some of the main factors that are preventing individuals from receiving loans or having access to other financial services.

The lack of IDs and passports is one of the main problems that blockchain can solve by providing each individual with a unique and immutable signature that can be used to store all the necessary information about the person. KYC procedures that are currently being applied will ensure the authenticity of individual data and will allow banks and other institutions to abide by local AML policies. The process of opening accounts thus becomes nearly instant and the issue of high transfer fees fades with the speed of transfers.

The report is right in saying that blockchain technology can play a pivotal role when it comes to boosting financial inclusion toward the unbanked and underbanked. The fact remains that the remittances business alone, which is worth an annual $466 billion can benefit from the inclusion of the unbanked into the circle of its legal and verified users through the use of blockchain.

Who Is Doing It?

The potential that blockchain unlocks in solving the problem of the unbanked has been noticed by a large number of projects, each of which is offering its own solution.

Peer-to-peer (P2P) lending on the Credits blockchain is another viable and promising offering on the remittances market. The Credits project claims that its users will be able to lend funds or borrow them without resorting to financial intermediaries. The platform states that its key markets for the service in terms of catering to the unbanked are developing economies, such as China, India, and the countries of the African continent. The main advantages of the Credits platform are accessibility and low commissions.

“Every participant in the P2P lending blockchain system will have to register and provide their e-mail address or Facebook,” says Igor Chugunov, CEO of Credits. “This alone is enough to be a lender. The list of information necessary for obtaining a loan looks more extensive: participants have to add their passport details, provide their phone number, domicile, specify the employer, salary level, attach a bank account statement or a tax return. That done, the platform participant is assigned the borrower’s credit rating. Then he or she submits a loan request specifying the desired amount, currency, interest rate, maturity, and investors select the loans they consider to be suitable from the list of requests. Investors are free to fund loans fully, partly or jointly.”

Stellar Lumens is one project aiming to provide the necessary infrastructure for the unbanked by providing a low-cost, instant, and inclusive payment network. The project claims that for users to be authorized in the system, they will need only smartphone and a downloaded Stellar Lumens wallet. Then, they will be able to transfer funds through the app and cash-in and cash-out in multi-currency or crypto at ATMs. Fast, easy and accessible to anyone with a cheap smartphone and an internet connection.

Next up is the renowned OmiseGo project that is closely tied to Ethereum. The OMG network promises to connect merchants with users anywhere in the world through its blockchain system. This approach is aimed at enabling them to pay in both crypto and fiat currencies. OMG promises to establish cash in/out points much like the aforementioned Stellar project.

Not So Smooth

The prospects of using blockchain for aiding the unbanked seem very promising, but there are multiple hurdles along the way to the widespread use and adoption of the technology.

First and foremost, there is the issue of Security & Privacy for Identities. Blockchain may be immutable and may be an advanced technology, but it is not on par with passports and other ID documents. As such, banks and institutions will simply not accept blockchain records as official documentation until there is appropriate equalizing regulation or policies.

The regulatory status of blockchain remains moot. Many countries are still skeptical about the technology after the cryptocurrencies hype and are unwilling to detach the two concepts of blockchain and crypto. The irony is that most untrusting countries are the ones with the greatest number of unbanked.

Widespread adoption of blockchain remains low for many reasons, not the least of which is improper research and development. Another important factor inhibiting adoption is poor education of populations about the use and application of the technology.

Initial startup costs are still in place and few are willing to invest significant funds into the application of blockchain without proof of returns on investments.

It’s All In The Stars

Having no access to financial services is a big wrench in the gears of social elevators. All that remains at this stage is to hope that the advent and gradual development of blockchain technologies and services based on them will be able to reduce the number of the unbanked and improve the standing of millions.