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Digital revolution is underway, bringing new capabilities, and perhaps surprisingly, the people that have the most to gain are those who are currently unbanked.
Blockchain technology is offering a radical departure from the traditional way in which many businesses are conducted. Specifically, the disruptive innovations accelerate the leapfrogging of financial services over traditional banks. The novel technology grants people in regions, where they cannot gain access to traditional bank services, the possibility to make payments for goods and services, pay bills, receive and make loans, withdraw cash, send money, and securely and cheaply conduct any financial transaction.
To put the need for such services into perspective, only consider that there are currently 2 billion people in the world who do not have bank accounts – most of them living in developing economies. According to World Bank’s data, more than 20 percent of unbanked adults receive wages or government transfers in cash, and many people in developing countries pay bills and fees in cash. Without a bank account, simple tasks such as sending money to a relative or paying bills, typically incur huge fees. In developing regions of the world, these fees compound financial hardships, and there is practically no way to get credit or a loan. So, how to solve this challenge? BitMinutes, a new financial startup, offers a pioneering solution by using prepaid airtime minutes as a new form of currency.
The Role of Technology
Increasingly, there is a call to make affordable and secure financial services available to the unbanked. The reason: financial inclusion is key to reducing poverty, and access to financial services plays a vital role in the founding and expanding of businesses, and making transactions more efficient.
The World Bank, through its Universal Financial Access 2020 initiative, set a bold goal for providing financial inclusion for billions of global citizens. They hope to cut the number of unbanked people to one billion by 2020. Such action is critical to help reduce global poverty and spur more economic growth.
FinTech can lead the way. For example, mobile phone companies have already played an important role in Africa. What started as people bartering and paying each other using prepaid mobile minutes has morphed into a significant economic driver. And today, many cell phone owners take advantage of mobile money features. In fact, Gabon, Ghana, Kenya, Namibia, Tanzania, Uganda, and Zimbabwe now have more than 40 percent of adults as active mobile money users, according to the GSM Association.
The mobile payment option is helpful but falls short because it does not provide some basic benefits of using a bank account. For example, users cannot withdraw cash, document or demonstrate their financial history to qualify for loans or credit, and many merchants do not accept this form of payment.
The bottom line is that unbanked people who use these mobile payment services still need more of the typical financial services offered by the use of a traditional bank account.
Enter Digital Currencies
Given this need, why do billions of people not have bank accounts? The most common reason for not having a bank account is absence of money, according to the World Bank. Others feel that bank accounts are too expensive.
These are all areas where blockchain technology and cryptocurrencies may be able to make a significant impact. But will people use these new technologies?
If the use of mobile payments is any indication, adoption of new FinTech will be rapid in developing countries. While only 2 percent of adults worldwide have a mobile money account, a staggering 12 percent of adults in Sub Saharan Africa have one, half of whom have no other financial account. The countries with the highest percentages of people using a mobile phone to receive money, also tend to have a relative scarcity of commercial bank branches, suggesting technology is well-received. This bodes well for the introduction of new technology like cryptocurrencies.
To that end, advances in blockchain and cryptocurrency innovations can greatly expand the types of financial services available to unbanked people. This is an area where FinTech startup BitMinutes aims to help.
BitMinutes is a cryptocurrency backed by prepaid airtime minutes, a real asset already traded informally globally by billions of mobile phone owners. BitMinutes tokens allow peer-to-peer cash transactions to over 2 billion bank accounts in 70 countries and prepaid top-up to over 4 billion mobile accounts in over 200 countries.
Additionally, BitMinutes will enable the expansion of micro-credit and nano-credit lending in communities where loans are rare and too expensive for most individual borrowers. BitMinutes ownership and transactional records will establish a new type of consumer credit score for emerging users who currently struggle with limited access to capital and a lack of traditional banking services.
With prepaid minutes already serving as a type of currency in developing countries, it is not a stretch to see a solution like BitMinutes breaking down the walls between mobile phone networks, and making the prepaid minute a cashable, universal token of exchange.
“BitMinutes has already established innovative approaches in applying blockchain and cryptocurrency innovations to the problem of reducing both direct and indirect costs within the financial service delivery system,” said BitMinutes CEO Tom Meredith. “We are focusing on the ultimate customer, the person in the village at the far outer edge of the current financial services delivery system.”
To aid in its mission, the company recently added Steven J. Kraus to its Advisory Board. Mr. Kraus most recently served as Director of the UNAIDS Regional Support Team for Asia and the Pacific.
“We are thrilled to have the energy, knowledge, and passion of Steven to tap in rolling out our BitMinutes technology over the next two years as we add markets in South America, Africa, and Southern Asia,” said Meredith.
BitMinutes wants every citizen in developing countries to have access to the same financial services which are available to the majority of people in the world. BitMinutes enable consumers to get the loans they need, and start or grow businesses, to transfer money, and use prepaid airtime for personal and business purposes daily. The new financial startup provides access to key financial services for over two billion unbanked globally.