How Blockchain Is Banking The Unbanked

Banking activities like saving, depositing money, making online purchases, making transfers, and other banking transactions might seem like simple everyday things to you and me. However, there are still a large number of people in this world who do not have easy access to banks. As a result, as many as two billion people may not even have bank accounts.

This category of consumers, known as the unbanked, is especially prevalent in low- and middle-income emerging markets and third world countries, but it happens in developed first world countries as well. There are still many citizens around the world, especially those living in impoverished areas or slums who are not able to use banks as a way to save money, thus denying them the stability, safety and even the interests that banks provide.

Then, there are those categorised as the underbanked. They may have bank accounts, or access to banks, but are not able to enjoy the benefits as a banking customer. This could be due to many reasons including banks that do not want to extend credit to the underbanked because of the risk of non-repayment, or that interest rates are so high that the underbanked are not able to save money. Large banking corporations are even offering microfinance loans these days, but at such high interest rates, the underbanked’s financial power is seriously undermined.

It is well-documented that access to savings and loans can help those in the lower-income levels improve their financial circumstances. Without these, they could be stuck in poverty for generations upon generations.

How Blockchain Can Help The Unbanked & Underbanked

Through the power of blockchain technology, the financial fate of the unbanked and underbanked has the potential to change for the better. Blockchain provides alternative methods for the underbanked to conduct digital financial transactions. It’s a good as having a credit or debit card, but without the fees associated with these services.

One of the biggest challenges for banks in serving the underbanked is that individuals in this category do not have clear identification information. This makes it difficult for banks to identify and assess their customers. However, blockchain technology makes it easier for individuals to have a digital identity, and their own financial account. This would allow low-income individuals to be able to save and lend through a blockchain network.

One of the biggest financial transactions by citizens of developing countries is remittance of money by immigrants working in a foreign country, sent back to families back in their home country. Usually, foreign worked need to depend on their employers to help with remittance. Using blockchain technology, the process is seamless and far simpler.

Examples of Blockchain for the Underbanked

Different types of blockchain platforms for the underbanked include the following:-

- Digital wallet platform

- Blockchain lending facilities

- Investment platform for third-world country citizens

For example, with a Digital Wallet like FINX, users can buy and own digital currencies, and save it right on the platform. Users are not tied to the conventions of traditional banks and are able to safely and securely save money, thus increasing their net worth bit by bit. Sending remittance to family members overseas is also easier as everything is through the same app and system, all protected by passwords and encryption. The blockchain system is really the way of the future especially for the unbanked and underbanked, with huge possibilities in impacting the financial world in a positive way.

How Blockchain Is Changing Cross-Border Payments

The ability to process payments across borders through electronic means has been invaluable for sending money between countries, online purchases and making other kinds of payments as easy as possible. However, while technological advancements has allowed fees for international transactions to go lower and lower, these fees are still considered relatively high and eat away into the amount being transacted.

For some consumers, whether they are the payer or the receiver, these transaction fees can be quite a lot. Even in the lower range, like Paypal’s 2.9%, it can still hurt, especially for small business owners.

With blockchain technology, transaction fees are expected to be even lower due to cutting out of middlemen like banks and credit card services. Thus, increasing the margins for business owners and receipt amounts for foreign workers sending money back home. Blockchain technology also means that digital currency stored online can be transferred to a bank or ATM instantly without having to wait for a minimum transaction amount or subject to a minimum number of business days.

How Blockchain Can Help The Migrant Worker

One type of consumer affected by transaction fees when remitting money across border is the migrant or foreign workers. With costs going at around 7%, this is quite a big cut compared to what money they’re sending back to their home countries. As migrant workers usually only make minimum wage, this loss from the total amount could affect them and their family back home, who are usually poor.

With blockchain, workers can send digital currency from their end straight to their relatives back home, using just their smartphone. This bypasses remittance agency fees, bank fees and intermediary fees. This allows remittance of currency with very minimal loss to both sides, and further helps alleviate poverty as concerned parties are now able to spend and save more.

The Benefit Of Blockchain To Small Business Owners

When a retailer offers to accept credit or debit card transactions, they are often charged a fee for each transaction. For bigger companies with big profit margins, these fees are often offset by the revenue. However, for small businesses, this eats into their profit, and might even spell a loss for them. With lower transaction fees, small businesses can earn more.

Another benefit to small business owners - and even big businesses, in fact, is that blockchain technology decreases instances of fraud. If a purchase is made with a stolen credit card, merchants are often not paid by the banks even though the items have been dispatched. As blockchain is resistant to modification of data as well as being instantaneous, data cannot be manipulated for the most part, while merchants get their money straight away - it’s as good as cash

Blockchain Means More Money and Faster Transfer For Users

With lower transaction fees and faster finance remittance, blockchain is set to disrupt the traditional monetary transactions. It’s also more accessible to those who are considered the unbanked and underbanked with the use of digital wallets and digital currency, such as using FINX to transfer money to a friend or to a merchant, straight from their savings account. Meanwhile, it's also safer than bringing wads of cash around, and eliminates the need to prepare small change. Blockchain transactions is definitely the way of the future that will make transactions easier while also helping to boost the economy.

The Battle For The Remittances Market
Cheaper cross-border transfers are coming thanks to the advent of blockchain and e-wallets.

It can be pretty hard to ignore how blockchain could revolutionise the remittances market in the future. With the low transaction fees it can afford as well as the quick transfer time, many remittance services are looking to add blockchain to their range of products due to its convenience. Not only that, but as blockchain can help facilitate peer-to-peer transactions, this opens up banking to the previously unbanked and underbanked. Blockchain helps financial institutions tap into a larger migrant worker market that regularly remit money back to their home country.

Among the players starting to test or roll out blockchain are Brussels-based SWIFT, that provides your Swift Codes for international transfers; ICICI Bank in India with the UAE’s Emirates NBD to facilitate remittances from the Gulf to India; blockchain provider Ripple; and what is probably the most well-known of all remittance companies, Western Union.

Meanwhile, at a recent payment-industry gathering in Singapore, Money 20/20, the managing director of Singapore’s central bank mentions that using blockchain to facilitate cross-border settlements could arguably be its strongest possible use.

The Value Of Remittance Money Around The World

Financial website The Economist describes remittance to developing and third world countries as “a lifeline for tens of millions of the world’s poor.” According to the World Bank, global remittance in 2018 amounted up to US689 billion, a 10% growth from 2017. In 2019, it is expected to grow to USD715 billion, of which US$549 billion is expected to be sent to developing countries.

India is at the top of the list as recipient country of remittances, receiving US$80 billion in 2018. This makes up 2.7% of India’s GDP. IN 2017, it was US$65.3 billion. Next on the list in 2018 are China (US$62.7 billion), Philippines and Mexico at US$34 billion each, and Egypt (US$26 billion), followed by Nigeria, Pakistan, Vietnam and Bangladesh.

Big numbers, indeed. However, for the poor, with relatively high remittance or transaction fees, this eats into the amount that the relatives at home receives. In some poor countries, inflation is high while the currency value is low, making whatever little they receive from their benefactors working on foreign soil all the more precious. This is why blockchain and e-wallet with the savings potential it offers due to much lower transaction fees is seen as more desirable.

With transfer of money through digital means, much of the operational costs tied to traditional money-transfer activities are cut out, allowing for lower fees. There is no need for physical outlets in both the sending as well as receiving city, and no need to have a “floating capital” for quick payments on the receiving end.

Quicker Remittance Through Blockchain and E-Wallets

Imagine a father who is a migrant labour worker in Kuala Lumpur, needing to send money instantly to his son in Myanmar, who has an urgent school fee he needs to settle. Using the traditional remittance method, the father will need to go to a physical outlet such as Western Union, have the money wired and pay a fee for the service. Meanwhile, the son might have to wait a few days, go to the Western Union in his city, and take out the cash, with a percentage cut out due to currency exchange. The amount the son receives is substantially less than what the father sent. A lot of the missing cash goes towards paying remittance fees and currency exchange, not to mention the additional incurred costs of travel to a physical outlet for both parties.

Meanwhile, if both the father and son used an E-Wallet such as FINX, the father can send money via blockchain straight to the son’s phone. The father pays only a low transaction fee, while the son receives money instantaneously. Both would not have to leave their respective homes to make this transaction. What would be even better is if the son’s teacher or school has FINX as well, so the son can also transfer the money digitally, thus eliminating the need to go to the ATM to withdraw fiat cash.

The Pros And Cons Of Moving To A Cashless Society

The world we live in today is more and more becoming a cashless society with the advent of technology. Not only is the use of credit and debit cards more widespread, but now consumers can even make purchases through their phone. From the relatively-primitive way of doing an online bank transfer into the account of the seller and then showing proof fr payment, to simply transferring digital currency from one e-wallet account to another, doing cashless transaction is simply more convenient than going to an ATM and keeping wads of cash in a physical wallet.

These days even government agencies and large financial companies are making the transition to going cashless. In some countries you can renew your passport or driving license online and pay via bank debit or credit card, and pick it up the next day or have it delivered to you. Who doesn’t love that level of convenience?

In fact, even non-financial companies are introducing e-wallet functions via their online payment methods, where you can order physical products through a service app such ad Grab, the ride-sharing app, or telco Digi, and pay the price to these services instead of the actual merchants. At the end of the month, you simply pay what’s owed to the service provider via their app, just like you would pay your monthly phone line bill.

Other than sheer convenience, there are other benefits to becoming a cashless society that can be a boon to consumers and even law enforcers.

Benefits of Becoming A Cashless Society

Among the benefits of moving towards fully using digital money:-

- The convenience of instant payment and transfers without needing to count out cash and giving small change

- Less hassle with depositing and storing money

- Convenient when travelling internationally without needing to change currency

- Extremely easy to remit money to a family or relative in another company without needing to visit a physical remittance office to both send and withdraw money at the other end

- Also, easier currency exchange online

- Less risk of being robbed and helps to lower crime rate with no tangible money to be stolen

- Decreases money laundering activities because of the paper trail that will be recorded digitally, if society goes fully cashless in the future

However, going fully cashless is not without its disadvantages. Sometimes, paranoia of the machine can be real. That’s why it’s important to weigh the pros and cons of going fully cashless and move forward in an informed manner, giving thought to as many precautions needed as possible.

Disadvantages of A Cashless Society

Among the possible negative issues with going fully cashless are:-

- All your personal financial information is available online and open to risk of possible data breach

- Susceptible to hacker activity, with the possibility of your whole account being drained, leaving you with no money at all

- Not everyone may be using the same e-wallet or blockchain system you are using

- The device needed to store and send money may not be affordable enough for everyone, especially the poor

- In daily transactions, there will most probably be fees incurred for every transfer. Compare this to no transaction fees when paying using hard cash

- We all know what an electricity blackout is like and how problematic it can be when you cannot access all your online outlets, especially during an emergency

As can be seen, going fully cashless has both its merits as well as faults. However, digital currency and blockchain technology is not going anywhere. Perhaps one way to mitigate some of the problems is by using a smart wallet like FINX, which can manage several different currencies including digital as well as fiat currencies. One centre for managing your money needs can make financial exchanges much easier, and make it more comparable to using cash for transactions. However the technology advances, we know that it is happening nonetheless and we can always look forward to innovation that helps to make life easier for both the everyday people as well as businesses and corporations.

Leveraging Technology To Bank The Unbanked

Of Southeast Asia’s 640 million people, imagine that only 27% has a bank account. That’s a large portion of the population left unbanked. However, mobile phone penetration rate is very high in this region. A 2017 report jointly produced by Google and Singapore’s Temasek Holdings estimated that the number of monthly active internet users in the region hovered around 330 million that year. Meanwhile, about 90% of Southeast Asia’s internet users are smartphone users.

This shows how the market is ripe for fintech companies to tap into by offering more efficient and cheaper banking and financial services to those who would otherwise be unbanked. As a big population of Southeast Asia work overseas and regularly send money back home, an easier way to send and receive payments from all over the world would be well-received.

Case Study: Cambodia

In Cambodia, one of the most popular mobile payment service providers used by its citizen is WING, a product by the Australia and New Zealand Banking Group. The service was launched in 2009.

To send money using WING, customers will pay cash at one of the agents and receive a code to be sent via phone to the receiving party. The receiver can then use the money stored in their e-wallet app (or other similar financial app) on their mobile phone, or withdraw the money from an ATM - provided the bank has an agreement to facilitate money withdrawal for account holders as well as non-account holders.

One of WING’s 4000 dealers, a Cambodian named Pheak, told The Phnom Penh post how the service is very useful as a secure way to store money. Says Pheak, “When I travel to provinces, I don’t need to carry my cash with me and members of my family can pick it up anywhere they want.”

Potential To Bank The Unbanked Using Digital Technology

The example provided by Pheak using WING demonstrates how big the potential is to bank the unbanked using digital technology in Southeast Asia. Gerald Ferguson, Asia General manager at global business intelligence and media provider RFi Group, says that in the developing countries in Southeast Asia, its people are “going digital” when it comes to commerce due to the large reliance on cash by individuals and small businesses.

With digital and blockchain technology, the unbanked and underbanked do not need a traditional bank account to use digital currency stored in an e-wallet, such as FINX. Users can soon transfer money, receive money, keep their money and also pay bills using just one app.

Additionally, cross-border remittance will also be easier with the FINX e-wallets, which has an in-built currency exchange calculator and it will be easier to transfer money to a relative back home also using the app. The receiver can then use the digital currency for online purchases or withdraw fiat currency from an ATM. It is undoubtedly a good idea to leverage technology to bank the unbanked as this contributes to the country’s economy and opens up more people to this banking system of the future.

Mobile Money In Emerging Markets

According to research by global consulting firm McKinsey & Company, there are 2 billion individuals and 200 million small businesses in emerging economies today that are not making use of the formal financial system like banks and credit lines. This may be because they do not have access to banking facilities and in some cases may not even be eligible. Their inclusion into the formal banking system may be hampered by low income, geographic location and difficulties in dealing with others who are also unbanked or underbanked.

For these consumers, cash is king, and everything is paid off in cash. However, they are losing out on the benefits of saving in a bank, including the safety and protection it provides, and are not able to invest their savings wisely. According to McKinsey, these consumers rely on informal lenders and personal networks for credit.

For these, the unbanked and underbanked, mobile money might be the alternative to cash that can offer them better benefits. This is because, while they may not have banking accounts, most of them will most probably have a mobile phone that can support an electronic wallet service. Mobile money makes for easier peer-to-peer transactions with a function that is as easy as cash, yet able to “keep” their money in a safe place. The money is easily accessed and transacted, and with online features, may even be invested, allowing users to earn interests and make more money.

What Mobile Money Means To Digital Finance Services

McKinsey states that with mobile money, the market is as big as 1.6 billion new retail customers in emerging economies. Thus, the revenue stream from this very new and largely untouched market can be very substantial. The increase is projected to be up to $4.2 trillion, in aggregate.

Serving the currently unbanked and underbanked via mobile money will open up opportunities to develop new business models. These include a vast array of digital transaction activities including micro loans and payments, online retail activities, online investments, remittance, and other data-based financial services. The McKinsey report even mentions that going mobile can help existing financial service providers reduce their operations costs up to $400 billion per year.

For digital finance services, mobile money can be a lucrative market, indeed. However, there are a few areas where initial investment will be needed before it becomes profitable. Certain costs will need to be considered and these might be quite substantial if any sustainable profitability is to be expected in future.

The Cost of Entering The Mobile Money Market

Some upfront spending and investments any digital finance player can expect to undertake include:-

- IT backbone required for transactions processing

- Personnel and real-estate costs for new digital financed service providers

- sales and marketing

- agent acquisition and management, and

- a large cash reserve to balance out cash distribution

Meanwhile, these investments must also be available for the long-term as it may take some time to see considerable growth before the business becomes sustainable. Also, over time some of the spending may be reduced as the company and its services gain traction. The mobile money market is projected to be a sure bet for well-prepared digital financiers, but they have to be in it for the long run.

As a smart wallet service provider, FINX is well-poised to enter and conquer the market with adequate infrastructure and investors backing, as well the experience of big players in the global finance industry who have been studying the emerging markets and the best way to serve them. There are exciting times to look forward to as mobile money takes off in a big way and it’s safe to say that FINX will definitely be part of this revolution.

What Is Bancor: A Brief Guide

As consumers move towards using blockchain, digital or cryptocurrency, e-wallets and other forms of digital currency, there will be many different kinds of tokens in use and circulated in the digital realm. Bancor is a blockchain protocol that allows users to convert between these different tokens directly, such as between BTC (Bitcoin), (ETH) Ethereum, (XRP) Ripple and others.

What Is The Bancor Network

Bancor also has its own native token, the BNT, which is the first-ever Smart Token on the Bancor Network and is held as a reserve by all other Smart Tokens. Bancor provides a network that helps bring liquidity to tokens that are not as highly-traded as the top coins like Bitcoin and Ethereum. There are always buyers and sellers looking to exchange these top coins. However, there are thousands of other tokens that are not as widely traded. This low-liquidity makes it harder to be exchanged and would render them almost of no value except with others that have the same token.

However, through the Bancor Protocol, a Smart Token can not only be instantly converted to any of its connected tokens but also to any of its connected token’s connected tokens. This means that the network of linked tokens will help expedite and create automatic conversions of Smart Tokens. This is done through smart contracts in the network, using a collection of formulas and algorithms to calculate conversion prices. This allows a lower number of conversions needed to arrive at the end token, and helps avoid depletion while guaranteeing liquidity.

The Benefits of Integrating With Bancor

The Bancor Protocol ensures that any token out of the thousands out there, whether high-liquidity or low-liquidity, can be converted into any other token at any time, without there needing to be an available buyer or seller to exchange the token with. This is different than cryptocurrency exchanges, where there needs to be a match between buyers and sellers before different coins can be exchanged.

As a decentralised liquidity network, Bancor provides users with an easy way to buy and sell tokens of any nominations. Thus, it will be a benefit to users of lower liquidity, integrating into the Bancor network. Token holders can then convert their tokens directly on the blockchain without having to wait for a matching buyer or seller. Bancor will offer more liquidity to the token and make it more tradeable.

Advantages of Smart Tokens From Bancor Network

Thanks to the Bancor network, exchanges between different cryptocurrencies are easier. As the Bancor protocol allows users to convert between different tokens directly, such as between BTC (Bitcoin), (ETH) Ethereum, (XRP) Ripple and other low-traded ones, it helps solve the problem of liquidity for the less popular tokens. Hence, these tokens are given more value and become more tradeable.

The exchange works with the use of Bancor’s own Smart Tokens. These tokens help facilitate the exchange between tokens of two different decentralized digital currencies without needing an available buyer and seller for the exchange.

Certainly, the Smart Tokens from Bancor Network has many advantages and would certainly be useful for cryptocurrency exchange.

Advantages of Bancor’s Smart Tokens

• Automatically processes the buy and sell order

Through smart contracts in Bancor’s networks, a smart token can immediately be converted into any of its connected tokens as well as its connected tokens’ connected tokens. This network of linked tokens help the buying and selling happen without needing both a buyer and seller to be available for the exchange to take place.

• The tokens always have high-liquidity

Because the Smart Tokens can be exchanged directly with any token in the digital world, anyone who owns it can rest assured that it will always be in demand and highly tradeable.

• It doesn’t incur extra fees

While you would need to pay blockchain platform fees, which should be quite low, there are no extra fees in exchanges between currencies. This is because the Bancor protocol allows a lower number of conversions needed to get to the end token being exchanged. Thus, this helps avoid depletion of value and guarantees liquidity.

• It allows investors to create other coins

Because any digital coin will be connected to the Smart Token and can then be exchanged for other digital currency, investors can create their own smart tokens. These tokens will be connected to the Smart Token and thus become tradeable.

• Predictable price slippage

Before going ahead with your transaction, you’ll be able to see the price slippage (slight price change that happens with every transaction). The bigger the exchange, the higher the slippage. Thus, with Bancor’s price slippage prediction, you can decide if you want to go ahead with the exchange anyway, or split it into smaller transactions.

• Helps keep the market stable

Lastly, the Smart Token from Bancor also offers lower volatility. As its the price of the Smart Token that will fluctuate in an exchange between two other coins, it helps to keep the buy and sell ratio more constant.

Bancor's New Wallet Designed For Cross Chain Token Trading

Bancor has rolled out its new wallet following its achievement as the world’s first cross-chain liquidity network. This means that users can now easily convert tokens between blockchains without giving up possession of their crypto. The decentralised liquidity network now offers cross chain token trading between the developer networks of Ethereum and EOS, offering users more options. Bancor’s new wallet uses BancorX to trade between Ethereum and EOS by using Bancor’s native token, BNT.

With this, users can now convert Etherum tokens into EOS tokens and vice versa. And they can do so now with no transaction fees at all and one-second transaction times. No deposit is needed, no need for order-matching between buyers and sellers, and no counterparty risk.

Features of Bancor’s New Wallet

The new wallet at Bancor, designed to facilitate cross chain token trading between Ethereum and EOS networks, comes with added perks and features. When users upgrade to the new wallet, or someone gets started on it, this is what they’ll get:-

- Free upgrade

- Free EOS account

- Sufficient resources to use the EOS blockchain - including RAM, CPU and NET.

- Access to an interface that allows users to hold both ERC20 and EOS tokens in one wallet - making token management simple and easy

- A simple user interface that allows for transfers and conversions between ERC20 and EOS tokens in a single action

- An in-wallet conversion mechanism that supports 140+ ERC20 and EOS tokens, enabling better management of token portfolio and allows for better response to market changes in a timely manner

- Users will be able to access their accounts, view holdings and manage tokens from any device including desktop, tablet or mobile

- Receive any airdrop token directly into the wallet

Bancor has announced that more supported blockchains are on the way, opening up more transactions with more networks in future.

In addition to the new features, the Bancor Wallet and Web App also currently provide price slippage information as you are making transactions, resilience against order book manipulation, almost instantaneous conversion times and 8700++ tokens pairs to choose from on the Ethereum and EOS blockchains. Getting or upgrading to Bancor’s new wallet is basically a no-brainer for those actively trading in digital coins or cryptocurrency.

The Future of Bancor’s BNT Cryptocurrency and Trade

The Bancor Network Token (also known as BNT) is the world’s first Liquid Token™, which is a new type of cryptocurrency invented by Bancor. A Liquid Token works through smart contracts that connects with not only another token, but also that token’s connected tokens. Basically, it’s like a hub token that connects all tokens in the Bancor network, even tokens that have never been connected before. This helps facilitate exchanges between different tokens, allowing them to be bought and sold according to continuously calculated prices based on the Bancor Formula.

Furthermore, this also helps stabilize token prices as a lower number of conversions is needed to arrive at the end token, thus avoiding depletion while guaranteeing stability. It’s been quoted as “the cheap way to convert one crypto coin to (an)other”. This is because there is no need fo there to be a matching buyer or seller present when exchanging coins in the Bancor network, thanks to the smart contracts that holds the value in Bancor’s reserves. It is also cheaper because the exchange fees would be much lower with fewer connections needed.

How To Buy BNT

The BNT coin can be purchased by sending ETH to an address. This instantly issues BNT tokens back to the sender, according to the current price that is calculated in real-time using the formulas as represented on the Bancor Protocol white paper. Likewise, liquidation of BNT to ETH can be done through the same method.

The best way to buy BNT is through the Bancor wallet, where users can buy, store and manage any ERC20 token and easily exchange coins, too, with built-in access to token conversions with instant on-chain settlement between any token on the Bancor Network.

In fact, according to Bancor, Bancor wallet transactions are prioritized the highest on the network, and received the highest level of protection, although it also receives the highest gas price that is paid as miners’ transaction fee. Not to worry, though, as paying the gas price can still be lower than the usual conversion fees and spreads added onto the usual token swaps between buyers and sellers. Bancor’s gas price calculation is based on an innovative estimation method that reduces the cost to buyers by excluding outsized gas prices from each block.

In fact, according to Bancor, Bancor wallet transactions are prioritized the highest on the network, and received the highest level of protection, although it also receives the highest gas price that is paid as miners’ transaction fee. Not to worry, though, as paying the gas price can still be lower than the usual conversion fees and spreads added onto the usual token swaps between buyers and sellers. Bancor’s gas price calculation is based on an innovative estimation method that reduces the cost to buyers by excluding outsized gas prices from each block.

Looking To The Future

Bancor is constantly working to optimize their network to reduce gas cost and provide the most efficient, low-cost on-chain conversions. However, due to this competitive price, users can also look forward to blockchain systems themselves (such as Ethereum and their competitors) to work at minimizing their own fees over time.

With ease of use and lower transaction fees, including when compared to other currency exchanges such as fiat exchange and remittances, Bancor’s network certainly seems like the most efficient and cheapest way to buy and sell currency, as well as storing coins. It won’t be a surprise should Bancor dominate the markets one day.