Banking the Unbanked
This post was originally published on April 09, 2019, and sent to Messari Pro subscribers.
The promise to “bank the unbanked” has been a popular meme in crypto since the early days. According to the World Bank, the global unbanked population is around 1.7 billion; two-thirds of whom now have access to mobile phones. While significant infrastructure is still required in order to support mass adoption, there are a growing number of decentralized financial services that cater specifically to the unbanked. In addition to those without bank accounts, there is also a large population of “underbanked” that have some basic financial services, but still lack access to more sophisticated investment products or lending markets, services that help preserve or grow one’s wealth.
The most obvious financial service that could benefit the unbanked population is a simple account used to store savings, and a payments protocol to transact those savings. Bitcoin offered that simple utility as its initial killer app. Until very recently, though crypto investors really only had only two reasons to invest in the industry.
- They were speculating on future adoption (99% of the population)
- They really needed a sovereign-resistant currency (Venezuelans, dark market participants) and were willing to accept bitcoin’s volatility.
In reality, volatility made crypoassets unattractive to most unbanked consumers. But newer projects like Maker’s Dai (a USD-pegged stablecoin) appear to offer a long-term solution to the volatility problem. That’s opened up a world of new opportunities. Compound offers decentralized money market accounts that allow crypto investors to earn interest on their holdings. BlockFi has created a lending platform that is beginning to gain traction. And synthetic investment instruments are getting built by providers like Marble that bring markets like the S&P to international investors.