Currently, there are an estimated two billion unbanked and underbanked people in the world. These individuals have no bank accounts and no access to basic financial services. This segment of the population is in dire need of a secure alternative banking solution.
Cryptocurrencies for the Un(der)banked
That is where cryptocurrencies come in. One of the “killer apps” of decentralized digital currencies is that they have to potential to bank the world’s unbanked and underbanked population by providing a secure alternative to informal financial services, to which these individuals often have to resort in order to manage their finances.
Anyone in the world with an Internet connection can gain access to cryptocurrencies as they are decentralized, borderless, and require no sign-up process or identity verification to use. Unlike banks, cryptocurrencies are open to everyone and do not discriminate. That, combined with the ease of use of mobile wallets, has been a key driver of cryptocurrency adoption in emerging markets.
For example, there are diaspora Kenyans who use bitcoin to send money to family members back home in Kenya who then convert the received bitcoin into local mobile money, which they then use to pay bills and purchase goods. This is very much in line with the vision of bitcoin as it has been created to allow anyone to “be their own bank” regardless of where in the world they are located.
Cryptocurrency and Credit Cards: the Next Step in the Evolution
While remittances are a great use case for decentralized digital currencies in emerging markets, the reality is that converting cryptocurrency into local currency can often be cumbersome and expensive as not every developing country has the same developed cryptocurrency ecosystem as, for example, Kenya does.
Furthermore, cryptocurrency merchant adoption is still near-zero, transaction settlement times are long, and the average person on the street finds it difficult to understand how cryptocurrencies actually work.
Therefore, for cryptocurrencies to become a viable protocol for the global unbanked population, users will require a more user-friendly and easy-to-use solution. This solution could come in the form of combining cryptocurrency with credit cards, which is exactly what Digits is planning to do.
Digits is developing a blockchain-based system that enables users to spend their cryptocurrency holdings using their existing debit or credit cards. Using Digits, users will be able to make card purchases as they would with any debit or credit card by linking them up to the Digits app, which will ask users upon making a purchase whether they want to pay with cryptocurrencies or by using fiat currency.
This will be made possible thanks to Digits’ Hedge Lending Network, which will collateralize each fiat currency card payment with cryptocurrency out of the user’s wallet so that the user can then pay for the purchase using his or her cryptocurrency holdings instead of fiat should he or she choose to do so. That way, cryptocurrency users all over the world can spend digital currency using bank cards anywhere cards are accepted.
If you want to learn more about Digits’ upcoming token sale, you can download its whitepaper and pre-register for the ICO here.