The path to success and financial security is paved with good banking services. However, those services are not typically available to everyone.
Financial inclusion — defined as individuals and businesses having access to useful and affordable financial products and services that meet their needs — has been out of reach for underserved communities, barring them from building financial security and generational wealth.
These communities have struggled over decades to find banking services that can help them build savings, buy homes or invest in alternative assets.
However, the evolution of cryptocurrencies presents a new opportunity to foster financial inclusion and help underserved communities lift themselves into a better financial future.
Read on to learn how crypto can pave the way to financial inclusion.
Why Traditional Banking Systems Struggle to Foster Financial Inclusion
Historically, minorities have struggled with the aftermath of segregation and the lack of resources associated with that dark time in U.S. history. However, the past is not so far behind us. A Brookings analysis shows that some of those practices are still happening today through traditional banking systems.
Some financial institutions have decreased their presence in majority-black neighborhoods. From 2010-2018, banks reduced their branches by 14.6%.
The costs of banking for minorities are a lot higher, too. While White account holders pay $5 monthly in banking fees, Black account holders pay $12, and Latinos pay $16.
However, without access to a bank or its services, people in these underserved communities may seek alternatives that could lead to financial ruin, such as predatory lending. An example is payday loans, with an interest rate of 391%.
The lack of services in these communities increases the population of unbanked individuals. African-Americans and Latinos represent 64% of the unbanked population.
It’s also harder for unserved communities to apply for a mortgage loan. Banks might refuse a request based on where the applicant lives; a practice called redlining.
In the past, with the help of some real estate agents, banks created a color-coded map to understand “the risk” of issuing home loans in those areas.
A CBS article shows that redlining is still prevalent today. This practice can discourage members from underserved communities from pursuing a home purchase, which is typically the path to securing their financial future.
However, a possible solution — smart investments in the cryptocurrency market — can help drive financial inclusion.
Why Does Cryptocurrency Foster Financial Inclusion?
Financial inclusion is top of mind for the digital asset industry. In fact, several crypto executives advocated for the potential cryptocurrencies have for financial inclusion during a digital asset hearing on Capitol Hill in early December 2021.
Circle Impact CEO, Jeremy Allaire, said: “We believe that the technology of digital currencies … and the way in which individuals with mobile devices can actively participate — not just domestically but with family members around the world by safely exchanging value — can bring significant benefits to [underserved] communities.”
“This, in turn, can open up credit and lending and other opportunities in these underserved communities,” Allaire added.
The CEO of FTX, Sam Bankman-Fried, said the current financial system doesn’t work for everyone: “It’s a product of payments infrastructure that is difficult and clunky enough to use that it just does not work for most people.” Saying also that crypto: “has the potential to improve a lot of people’s lives.”
Using Bitcoin as an example, it has many advantages that traditional systems don’t have.
It can be sent anywhere, fast, almost free, and without banks. It has proved itself a valuable asset to own and easy to manage. It has attracted many new and veteran investors and can be purchased for any amount.
You can learn more about Bitcoin here.
What Can You Do With Cryptocurrency?
- You can request loans with ease and without a considerable tax percentage.
- You can take part in public offers for a fraction of the cost.
- You can have all your hard-earned money in a digital wallet, secured, and out of any banking contract.
There are several coins and projects that you can look into. Cryptocurrencies can change your financial situation with smart investments and possibly provide significant returns.
You don’t need banks to convert crypto into dollars or any other currency. You can use a cryptocurrency exchange, crypto ATM, request a debit card — to name a few options.
Crypto was made by people, for people. It will revolutionize financial inclusion in society. But you must evaluate this opportunity properly.
What to Keep in Mind When Investing in Cryptocurrency
Technically, you could open an account on any platform out there and buy digital assets, but it’s wise to look into digital wallets that will allow you to earn yield on your crypto. Here are some other guidelines to remember when investing in crypto.
- Never invest more than you can afford to lose.
- Don’t be influenced by FOMO! (Fear of missing out).
- Research, research, research.
- If you can’t explain what you’re investing in, visit sites like Abra that offer helpful resources.
- Try not to panic sell when you see your crypto price has dipped. HODL (Hold on for dear life) and see if the price rises again.
It bears repeating, but — just like any other financial instrument — you need to research if investing in cryptocurrency is right for you right now.
The market does experience some volatility, which can rise and fall.
But that volatility can reward you down the road. Do your due diligence, research, and make small investments in a coin or token that makes sense for you and your budget.
Traditional banking services still have a long way to go to foster financial inclusion.
But with crypto, there is an opportunity for underserved communities to build a successful financial future.
Abra is committed to creating a simple and honest platform to enable millions of crypto holders to maximize the potential of their crypto assets, and our vision is an open, global financial system that is easily accessible to everyone.
We will continue to create educational resources for underserved communities to increase their knowledge of the crypto market.
Join our community and find more people achieving their financial goals through crypto.
Watch our video series: introductions to cryptocurrencies, Money Talks, and more!
Abra supports 117 cryptocurrencies and counting.