Crypto can boost economic welfare in underbanked regions

Disclosure: The views and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of crypto.news editorial.

The world economy is developing rapidly, but financial exclusion remains a persistent problem. A 2022 report from Visa found that 2.1 billion people worldwide are unserved or underserved by digital financial services. This gap often traps individuals and businesses in a cycle of limited growth and opportunity in underbanked areas.

Good news? Emerging technologies, especially cryptocurrencies, present an opportunity to rewrite this narrative. Merchants’ adoption of crypto payments has the potential to significantly increase the prosperity of these underbanked economies.

Inflation hurts cash

It is becoming increasingly difficult to rely on cash in economies experiencing high inflation and price instability. In countries like Argentina, Venezuela, and Zimbabwe, local currencies have lost so much value that regular cash transactions are rife with inefficiencies.

Stablecoins tied to fiat currencies like Tether (USDT) and USDC (USDC) or cryptocurrencies like Bitcoin (BTC) could save the day. By enabling safer, peer-to-peer transactions without being tied to unstable local currencies, crypto can help businesses preserve their revenue value. Crypto payments are less sensitive to inflation rates, which cause cash to lose value. This is invaluable for regions where central banks struggle to maintain economic stability.

The change is already clearly visible. According to a 2022 Deloitte survey, 93% of merchants accepting cryptocurrency reported positive impacts on customer engagement and satisfaction metrics. Consumer confidence is growing as more merchants realize that cryptocurrency allows them to offer more efficient transactions. In the long run, this stimulates more sustainable economic activity.

Crypto payments: An interconnected future for merchants and cross-border transactions

Rising crypto adoption rates among merchants are also supporting cross-border growth. Cryptocurrency’s ability to provide lower rates and faster payment times is starting to make traditional SWIFT-based banking systems look even more archaic. Small businesses, in particular, can trade more effectively with the help of cryptocurrency payments, avoiding excessive fees and reducing the risk of volatile exchange rates.

Additionally, decentralized currencies can guarantee transparent financial transactions and minimize corruption, which is essential for economic stability in low-income regions. The resulting shift to crypto ultimately leads to the expansion of local trade, which has an inevitable, positive impact on the wider economy.

Micropayments: A game changer in financial inclusion

The desire to accept crypto also opens up a largely untapped opportunity to promote financial inclusion. In underbanked regions where daily income can be as low as a few dollars, traditional banking fees make small transactions impractical. But cryptocurrencies are unlocking a new frontier for commerce by enabling seamless micropayments with minimal fees.

For example, if farmers can sell their produce in small increments without suffering a significant loss of income due to transaction costs, profit margins increase and, as a result, strong financial activity is created in local economies. Similarly, crypto gives service providers, such as rideshare drivers or local artisans, the opportunity to receive smaller payments instantly and directly, bypassing intermediaries. This adds a sense of fluidity to the fabric of daily operations.

As crypto becomes more widely adopted, it will also become more feasible for things like pay-as-you-go home services to be handled through micropayments. This could eliminate the need to pay large, upfront and unaffordable costs in communities struggling to stay above the subsistence line. In this sense, crypto-backed micropayments have the potential to change lives.

Businesses in emerging and developing markets serve an underbanked yet young and tech-savvy population, creating a unique opportunity for innovative payment solutions. While mobile money plays a transformative role in closing the financial gap for the unbanked, cryptocurrencies offer an even more powerful and convenient alternative.

Offering greater accessibility, lower transaction costs, and unlimited capabilities, cryptocurrencies enable businesses to serve this demographic with seamless, reliable, and inclusive financial services. For these markets, crypto adoption could redefine financial ecosystems and accelerate economic inclusion.

Important considerations for payment solution providers

While the promise of cryptocurrency is undeniable, it is not a one-size-fits-all solution. It is crucial that payment providers address several key factors when developing systems tailored to underbanked regions.

To start, solutions need to be designed with inclusivity in mind. The systems should run smoothly on basic smartphones and even feature phones, as many people with underbanked accounts lack access to advanced technology. To encourage widespread adoption, user interfaces must be intuitive.

Accordingly, there is a need to ensure adequate awareness through educational resources. Cryptocurrency may seem intimidating to those using it for the first time. Payment providers should invest in educating both merchants and customers on how cryptocurrency works, how to enjoy its benefits, and how to properly manage risks. Financial literacy campaigns will play a critical role in building trust and widespread adoption by both merchants and consumers.

Regulatory compliance is also a challenge that requires careful navigation. Operating in underbanked regions can be a complex process in this respect. Providers must work closely with governments to ensure compliance while advocating for open and supportive policies that enable innovation. First of all, security is paramount. Providers must implement strong fraud prevention measures. Hacks and the fear they instill among new users are often the root cause of slow adoption and seriously undermine the progress of trust.

final thoughts

The integration of cryptocurrencies into commercial ecosystems in underbanked regions is more than just a technological shift; It is an opportunity to increase economic prosperity and encourage participation.

Cryptocurrency payments have the potential to be a powerful stabilizer in the global economy by addressing the shortcomings of traditional payment systems, enabling companies to do business internationally and helping people avoid the traps of cash dependency.

But collaboration between local communities, governments and payment solution providers is essential for success. The adoption of cryptocurrency payments has the potential to become a key component of financial inclusion for billions of people around the world and, with the right tactics, surpasses its status as a niche trend.

Meryem Habibi

Meryem Habibi is Bitpace’s chief revenue officer. With extensive experience in marketing, communications and sales in the Fintech industry, Meryem brings a wealth of knowledge and expertise to the table. Working with industry giants such as Samsung and Diebold Nixdorf, Meryem collaborated at the board level on strategy development, revenue stream diversification, risk management and uncovering growth opportunities in emerging markets. Meryem is passionate about delivering seamless, user-friendly products to an increasingly evolving and disruptive industry. With his dedication and experience, he plays an important role in Bitpace’s progress towards its goals of innovation and success.