“To provide a platform for the provision of banking services to the unbanked…” – this could be literally an abstract picked by the great majority of 2017 fintech pitch decks, promising to change once and forever the problem of the unbanked population, by adopting blockchain technology.
Three years later, with the majority of blockchain infrastructure platforms being stable, scalable, secure, and proving their value proposition, the number of projects solving real-world problems in that domain are only very limited and geographically restricted.
Most startups have already wiped out, despite raising big venture rounds, either from institutional capital or retail investors.
It’s worth mentioning, that banking the unbanked by using the blockchain technology, has not been just a push from the blockchain startup community, but also inspired by international organisations such as the World Bank.
Deloitte’s report Can blockchain accelerate financial inclusion globally? reports, organisations such as the Bill & Melinda Gates Foundation have launched several initiatives to extend the access to financial services for the unbanked and underbanked, while the United Nations and its member states have indicated financial inclusion as a pivotal enabler for many of the UN’s 2030 Sustainable Development Goals.
Also Read: How Blockchain is disrupting the traditional finance industry
The unbanked population by its great majority resides in developing countries. Seven countries have almost half of the world’s unbanked population:
- China: 13 per cent
- India: 11 per cent
- Indonesia: 6 per cent
- Pakistan: 6 per cent
- Nigeria: 4 per cent
- Mexico: per cent
- Bangladesh: per cent
Nevertheless, programmes and real-world change are far too slow, while blockchain has played only a limited role to ‘bank the unbanked’.
On the other side, we see some geographical areas, that blockchain companies are slowly becoming an integral part of the economy, by replacing the slow and expensive financial ecosystem.
Startups that have failed to materialise
Humaniq, a blockchain startup, which has raised more than US$5 million from almost 12,000 retail investors with crowdfunding, aiming to offer financial services to eradicate poverty amongst millions of people living in the emerging economies, seems that is has failed to build any traction. The latest published reports date back to 2018, while both online communities and social media look barely active.
BitSpark, which was founded in 2014 and raised more than US$700,000, has pioneered the first cross border cryptocurrency remittance. The Bitspark web and mobile app platform enabled individuals and businesses to join the Bitspark network as ‘Cash point’ agents facilitating the exchange of cryptocurrencies and cash on behalf of their customers. Bitspark closed its doors as of March 4, failing to prove it’s value to the market.
PundiX, an Indonesian fintech company that was launched two years ago with a US$34 million ICO and an ambitious plan to equip thousands of retailers with crypto POS terminals, according to Decrypt’s has failed to materialise into real-world traction. It seems that the company has never managed to build the PoS devices.
The list of failed startups is very long, though we have selected only a few to present, with different backgrounds and stories.
Also Read: The battle between private and public blockchains
On the other side, there are a handful of projects, which are currently noticing increased adoption, even though this adoption might be geographically limited. Understanding a specific market, and dominating it, before expanding is necessary to grow a product.
Latin America
Dash, one of the older digital currencies, which was forked from the Bitcoin protocol and is operated by a decentralised autonomous organisation run by a subset of its users, which are called “masternodes”, has slowly re-organised and currently dominating as a scalable digital payments infrastructure.
Their value proposition as outlined in the website is that you can move Dash in a second for less than a cent: any amount, any time, anywhere.
Dash usage in Venezuela is on the rise, with notable partnerships such as with Burger King. Dash Text also allows people who don’t have smartphones to send and receive the cryptocurrency by SMS. Cell phone penetration is extremely high in Venezuela, with around 85 per cent of the population owning a mobile phone.
According to the Q1 report, commercial payments using Dash grew 104 per cent for Q1, helped by a number of partnerships in the Latin American region. This growth has been spurred by several partnerships in Latin American countries, notably in Venezuela and Brazil.
Southeast Asia
Created by an established payments processing company called Omise, OmiseGo seeks to use the OMG cryptocurrency to streamline how electronic wallets to issue and exchange assets.
Also Read: XanPool launches platform to enable P2P transactions from local currency to cryptocurrency in SEA
The idea is that digital payments today mostly occur within single payment platforms like Venmo or Alipay, meaning money can’t move easily from one platform to the other. The vision, then, is that payment networks like Omise could leverage OmiseGo to trade assets on behalf of users, sourcing liquidity for trades and facilitating transfers on a blockchain that serves as a real-time market for assets in all participating networks.
Besides McDonald’s, Omise has attracted a host of big-name clients in Thailand, such as King Power, the duty-free retail monopoly, and True Corp., the country’s second-largest mobile carrier.
India and Indonesia
After Binance US-dollar stable coin BUSD, Harmony has launched a fully audited and fiat-backed stable coin with Indonesia’s Rupiah Token. Rupiah tokens on Harmony will enable real-time settlement for cross-border payments.
Launching an Indonesian fiat-backed stable coin builds upon Harmony’s cross-border payments strategy, allowing local fintech and remittance companies to leverage these stable coins for global payments. These stable coins are fully-regulated and have fiat on/off-ramp support through digital asset exchanges and local partners.
The Rupiah Token stable coin, is part of Harmony’s MoneyHome project, enabling instant low-fee P2P remittances, with a geographical focus on exchange corridors of Indian and Indonesian remittance markets.
The Silicon-valley project has built notable partnerships in the region with Binance, CoinDCX, WazirX, and Tokocrypto to materialise it’s scope.
Africa
Kamix is a commission-free money transfer application between Europe and Cameroon. The app is multi-purposed to better serve Africans and their diaspora as it features fully integrated mobile money, messaging and marketplace modules designed by Africans, for proud Africans.
With the ambition of its promoters, the Kamix application targets nearly 25 million users and 18% of the money transfer market in Cameroon by 2022.
Summarising what it has worked, and what didn’t, we can see that startups which have achieved small, but important milestones, had a great understanding of the local market, and the geography, while starting with baby steps.
Region-agnostic protocols, or generic products, have failed to structure a product that could be used. There are 100s more startups using crypto to offer banking services, though the market might fail to materialise due to expensive fiat gateways.
Crypto to fiat providers such as MoonPay, SimpleX, and Transak are charging expensive fees (more than 3 per cent) which is not viable for the emerging countries.
Crypto startups, need local partners, which will constitute fiat gateways, and ramp-on/ ramp-off solutions competitive to compete with legacy banking systems.
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