The number of unbanked and unbanked consumers in the United States is astonishingly high and will continue to grow as a result of the COVID-19 pandemic. Without full and fair access to basic financial services, many of us consider 25% of the adult bankable population in the United States to be a disproportionate amount of income for exorbitant fees and unfairly high interest rates.
When you focus on outdated, bureaucratic, legacy banking, many consumers face additional indigenous peoples, including delays, inefficiencies, and hidden costs that make participating in the wider financial system difficult or out of reach.
The solution? Easy. Immediate. Direct.
Enter: Blockchain Technology and Digital Assets.
Blockchain technology and digital assets can fundamentally change the way non- and sub-banks interact with the financial industry. Basic financial services will improve, especially when it comes to receiving or sending funds electronically, from paychecks to COVID-related economic impact assessments.
Cross-border payments or transfers are also converted. Today they are far more cumbersome and expensive for end users than they should be, but blockchain technology is already providing a smoother and more reliable experience for those sending or receiving money worldwide.
The democratization of access
There are currently 70 million people in the United States and an estimated 1.7 billion people worldwide who lead their daily lives outside the financial system. For these individuals, routines that we sometimes take for granted – paying bills, cashing checks, sending money to family, building loans – are incredibly time-consuming and prohibitively expensive – even if they have enough money to need these services.
How expensive? Well, among those with low incomes and little access to basic financial services, it is not uncommon to spend up to 10% of disposable income on fees and interest comparable to household spending on food and other basic necessities. Given the power of new technologies to increase efficiency and reduce costs, these numbers should and could vary widely.
A study by Imperial College London estimates that just a 10% increase in digital payment adoption can bring 220 million people into the formal financial system who were previously underserved or excluded.
Fortunately, the general digitalization of our world – from smartphones to digital wallets to interoperable payment networks – is accelerating the shift to real-time digital payments and an increasing number of use cases leveraging blockchain technology. It’s early days, but digital asset technologies like XRP show promise. Acceptance is increasing and there is growing recognition that fintech can (finally) move the needle of global financial inclusion.
The role of blockchain and digital assets in real-time payments
A digital asset like XRP “ties the dots” between two currencies and makes moving them faster, cheaper, and more reliable. By using an expansive global blockchain network like RippleNet, processing time for cross-border transactions can be cut from three days to just three seconds. This has profound implications for accelerating financial inclusion and creating economic fairness and opportunity.
Those facing financial hardship will benefit most from more accessible and affordable real-time digital payments, especially during (and after) a global pandemic. In response, financial institutions need to be responsive and able to provide real, usable currency to consumers, eliminating delays, inefficiencies and additional costs.
This means that local accounts no longer need to be pre-funded. Less exposure to volatile exchange rates. More liquidity for consumers – more money in your pocket. The capital is released and is available for other, economically beneficial purposes, e.g. B. for purchases and savings with added value. This is the future of a more participatory and just financial system, and the platforms we need to get us there are available today.
The way forward: Achieve real-time digital payments
Interest, demand and trust in digital payment services are growing – partly due to the impact of COVID-19 – but also in response to the emerging consensus that current services do not meet the needs of the global marketplace. It is now becoming increasingly clear that there is a unique opportunity to harness the power of blockchain technology to create a better, more seamless, and more inclusive financial system.
Banks, financial institutions and governments capable of real-time digital asset technology and digital payments – especially in response to COVID-19 – will help usher in an unprecedented new era of financial inclusion.
These first movers and adopters, along with an exploding supportive global ecosystem of complementary financial services providers, are viewed as innovators. no holdouts – or worse, obstructionists. They are seen as builders, not selfish disruptors. And they will be both more competitive and more helpful to a vastly expanded serviceable consumer market that was once out of reach but is now locked in.
Find out more about how partnering with Ripple and using RippleNet can help you meet the increased demand for real-time payments by joining our network here.