Cryptocurrencies can boost economic well-being in underbanked areas

The global economy is evolving rapidly, but financial exclusion remains an ongoing issue. Visa 2022 report open 2.1 billion people globally are still deprived or suffering from a lack of digital financial services. This gap often traps individuals and businesses in underbanked areas in a cycle of limited growth and opportunity.

The good news? Emerging technologies, especially cryptocurrencies, represent an opportunity to rewrite this narrative. Merchants’ adoption of cryptocurrency payments has the potential to significantly raise the well-being of these underbanked economies.

Inflation cripples cash

It is becoming more and more difficult to rely on cash in economies suffering from high inflation rates and price instability. The value of local currencies has depreciated dramatically in countries such as Argentina, Venezuela and Zimbabwe, making regular cash transactions fraught with inefficiency.

Stablecoins pegged to fiat currencies, such as Tether (USDT) and USDC (US dollars), or cryptocurrencies such as Bitcoin (Bitcoin), could save the day. By enabling more secure peer-to-peer transactions without relying on turbulent local currencies, cryptocurrencies can help businesses protect the value of their revenues. Cryptocurrency payments are less vulnerable to inflation rates that cause the value of cash to decline. This is invaluable for regions where central banks struggle to maintain economic stability.

The transformation is already clear. According to Deloitte 2022 reconnaissance93% of merchants who accept cryptocurrencies reported positive impacts on customer engagement and satisfaction metrics. As more merchants realize that cryptocurrencies allow them to offer more efficient transactions, consumer confidence is boosted. In the long term, this will stimulate more sustainable economic activity.

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

Rising adoption rates of cryptocurrencies among merchants are also fueling cross-border growth. The ability of cryptocurrencies to provide discounted rates and faster settlement times is starting to make traditional SWIFT-based banking systems look very outdated. 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.

In addition, decentralized currencies can ensure transparent financial transactions and reduce corruption, which is essential for economic stability in low-income areas. The resulting shift toward cryptocurrencies ultimately expands domestic trade, which has an inevitable positive impact on the broader economy.

Micropayments: a game changer in financial inclusion

The willingness to accept cryptocurrencies also opens up a largely untapped opportunity to promote financial inclusion. In underbanked areas, where daily income may be as low as a few dollars, traditional banking fees make small transactions impractical. However, cryptocurrencies enable frictionless micropayments with minimal fees, opening up new frontiers of commerce.

If farmers, for example, could sell their produce in small increments without losing significant revenues due to transaction costs, profit margins would increase thus creating strong financial activity in local economies. Likewise, cryptocurrencies give service providers, such as taxi drivers or local artisans, the opportunity to receive smaller payments instantly and directly, bypassing intermediaries. This embeds a sense of liquidity into the fabric of everyday transactions.

As cryptocurrencies become more widely adopted, it will also become possible to transact things like prepaid household utilities in micropayments. This can eliminate the need to pay large, unaffordable upfront costs in communities struggling to stay above the bread line. In this sense, micropayments based on cryptocurrencies have the potential to change people’s lives.

Companies in emerging and developing markets serve a large segment of the population that is underbanked but young and tech-savvy, creating a unique opportunity for innovative payment solutions. While mobile money has played a transformative role in bridging the financial gap for the unbanked, cryptocurrencies represent a more powerful and convenient alternative.

By providing greater accessibility, lower transaction costs, and limitless capabilities, cryptocurrencies enable businesses to serve this demographic with seamless, reliable, and end-to-end financial services. For these markets, the adoption of cryptocurrencies could redefine financial ecosystems and accelerate economic participation.

Key considerations for payment solution providers

Although the promise of cryptocurrencies is undeniable, it is not a one-size-fits-all solution. It is important that payment service providers address several key factors when developing systems tailored to underbanked areas.

First, solutions must be designed with inclusivity in mind. Many underbanked individuals lack access to cutting-edge technology, so systems must work seamlessly on basic smartphones or even feature phones. User interfaces must be intuitive to encourage widespread adoption.

Related to this is the need to facilitate adequate awareness of educational resources. Encryption may seem intimidating to first-time users. Payment providers must invest in educating both merchants and customers about how cryptocurrencies work, how to take advantage of their benefits, and how to truly address the risks. Financial education campaigns will play a crucial role in building trust and widespread adoption by merchants and consumers alike.

Regulatory compliance is also a challenge that needs to be carefully navigated. Working in underbanked areas can be a complex process in this regard. Service providers must work closely with governments to ensure compliance while calling for clear and supportive policies that enable innovation. Above all, security is paramount. Service providers must implement strong fraud prevention measures. Hacks and the fear they perpetuate among new users are often a major reason for slow adoption and severely undermine any progress in trust.

Final thoughts

Integrating cryptocurrencies into business ecosystems in underbanked regions is more than just a technological shift – it is an opportunity to drive economic well-being and promote inclusion.

Cryptocurrency payments have the potential to be a powerful equalizer in the global economy by solving the inefficiencies of traditional payment systems, enabling companies to do business internationally, and helping people avoid the trap of relying on cash.

However, 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 globally, transcending niche status with the right tactics.