By Tricia Martinez, Managing Director of Techstars Payments and Techstars Industries of the Future Accelerators
Still today, over half the global population operates outside the formal financial system. Why? Because it was never designed to service the vast majority. Blockchain has the power to bring financial freedom to the masses. Through a decentralized financial system designed around the behaviors of consumers and needs of businesses we can put financial power into the hands of those who need it most.
Banks, mobile money operators, non-government organizations, fintech companies, and most actors in the financial space are trying to force a solution on consumers that doesn’t solve the problem of financial exclusion.
Let me break it down:
1. Banking has failed in emerging markets
Outdated systems, minimal infrastructure, poor customer service, fee-riden accounts and transactions, limited mobile technology, aggressive account and loan vetting processes are just a few of the reasons why the majority of consumers cannot (or chose not to) access or use the traditional banking system.
2. Consumers don’t use banks and don’t want to use banks
Consumers are disincentivized from using banking because of the fees and inaccessibility of the system. What consumers want is something that fits their lifestyle, their behaviors, their goals, their lives. Banking does not do that today.
3. Consumers use informal services
With the existing systems failing around them, consumers have been forced to use informal community-based services in order to participate in their economy. Mobile money has shown us how consumers and businesses have had to rely on informal financial services to participate in their economies.
4. Blockchain is the key
Blockchain technology and crypto-assets allow these same consumers, who previously could only access financial services from their local community, to now take part in the global economy. Just think, community-based finances — but on a global scale. Consumers and businesses can now access loans from anywhere, earn by doing work for people across the world, or just secure and grow their savings without disrupting their lives. With blockchain and crypto-assets, consumers are no longer bound by their immediate borders or the closed systems in their country. Within the blockchain ecosystem disruptors have a decentralized platform to build on top of and solve these financial challenges for consumers and businesses.
You might be thinking, isn’t blockchain a scam if the crypto market is tanking right now? No! The cryptocurrency market is taking a beating, some crypto companies are going bankrupt, and consumers are losing trust in the system, but this is part of the ebb and flow of any new market. There are bad actors that take advantage of the system and just like we saw a crypto winter in 2018, the crypto market will bounce back and blockchain will continue to advance. The great thing about bear markets is that it weeds out those bad actors. The people who stick around are the evangelists - developers, builders, and gritty entrepreneurs that recognize the endless opportunity of this technology.
Emerging markets are young, vibrant, and growing fast. These markets are experiencing rapid growth, producing monetary returns and starting to enrich the populous and are on the verge of a financial revolution because of this growth. Not only do these markets have low banking engagement, young populations, and high mobile penetration, but consumers are actively looking for an economical solution to financial services, a solution that is not cost prohibitively priced. Is blockchain the golden ticket? No. But it will enable so many powerful and scalable use cases in the financial sector when designed properly, ethically, and with the end customer in mind. And when you pair that technology with strong entrepreneurs, technologists, and big gaps in the market, amazing things will happen.
Blockchain can help create a just and accessible financial system that enables anyone to reach financial freedom. At Techstars Payments Accelerator powered by Stellar and MoneyGram, we are looking for the innovators enabling financial freedom for the masses. Whether you are building on blockchain or not, launching a remittance startup, enabling infrastructure as a service, or driving financial literacy, we want to talk with you! Applications are open until September 28th for our Inaugural Hybrid program. Apply today or reach out to us to set up office hours and learn more!