Awakening my mind to the existence of the unbanked

in #unbanked2 years ago

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I am writing this blog about an interesting term called “the unbanked”. I never knew this term existed until I started studying cryptocurrency. But learning about cryptocurrency has been both an education process and eye opening process.

It was an educational process because it forced me to learn more about the traditional banking system. It was an eye opener because I felt like I opened my eyes and saw what was going on around me in the financial world with new eyes, new thoughts and new understanding. It was as if I had been awoken.

But I digress, but I hope you enjoyed the digression. This essay is about the unbanked. We call people “unbanked” because they don’t have access to banks and/or don’t use available banking services for a variety of reasons. Initially I thought that “the unbanked”
lived only in poor developing countries.

I thought cryptocurrencies can help them by providing them the equivalent of banking services; such as a place to store their job or business related earnings and electronic methods of paying bills or transferring wealth. Now when it comes to America many people assume that everyone here has access to and uses traditional banks for banking services, but apparently that’s not the case. In fact the number of “unbanked” in America is so large that it has attracted the attention of both banks and the government entity that guarantees the bank deposits of currency or fiat called the FDIC.

This is an article I read:
“A survey by the Federal Deposit Insurance Corporation (FDIC) found that 7% of households (9 million) in the US are unbanked and an additional 19.9% of households (24.5 million) are underbanked. Several counties in the state of Georgia are among the worst affected areas. According to reports from the FDIC over the past five years, Atlanta, Georgia is in the top ten of most unbanked cities in the country, and more than one in ten households have no involvement with traditional banks. Around 30% of residents are underbanked, meaning they might have checking accounts, but have to rely on other kinds of services like pawn shops, check-cashing and payday loan companies to get cash and credit,” The state of Georgia now has a total of 101 bitcoin ATM kiosks, making it the third largest US market for bitcoin ATMs behind the cities of Chicago and New York.”
Source

This is the study by the FDIC;
“2017 FDIC National Survey of Unbanked and Underbanked Households
The FDIC is committed to expanding Americans’ access to safe, secure, and affordable banking services. The FDIC National Survey of Unbanked and Underbanked Households is one contribution to this end. To assess the inclusiveness of the banking system, and in partial response to a statutory mandate, the FDIC has conducted the survey biennially since 2009.1 The most recent survey was administered in June 2017 in partnership with the U.S. Census Bureau, collecting responses from more than 35,000 households. The survey provides estimates of the proportion of U.S. households that do not have an account at an insured institution, and the proportion that have an account but obtained (nonbank) alternative financial services in the past 12 months. The survey also provides insights that may inform efforts to better meet the needs of these consumers within the banking system. Estimates from the 2017 survey indicate that 6.5 percent of households in the United States were unbanked in 2017. This proportion represents approximately 8.4 million households. An additional 18.7 percent of U.S. households (24.2 million) were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system.
Source

The 2017 survey examines a number of additional topics, including the methods that banked households used to access accounts, bank branch visits, use of prepaid cards, use of alternative financial services, saving for unexpected expenses or emergencies, use of credit, and the methods that households used to conduct financial transactions in a typical month. See economicinclusion.gov for survey findings, the ability to generate custom tables and charts using 2017 and earlier years of survey data, and data downloads and documentation.”
Source

Conclusion:

The FDIC pays for statisticians to survey a certain percentage of people in very large cities like New York, Los Angeles and Atlanta, Georgia. Interestingly enough in cities with large numbers of “unbanked” people there are also large numbers of Cryptocurrency ATMs! Atlanta, Georgia has the largest number of unbanked of the cities surveyed in 2017. Georgia has the second largest number of Bitcoin ATM per state at 101. This statistic is from Coinsource a Bitcoin ATM provider who reports they keep track of their ATMs and those of their competition. I think this suggests that large numbers of people on America are unbanked and using other non-traditional businesses for their banking needs. I think the large number of cryptocurrency ATMs popping up in these same cities suggests that cryptocurrency is a viable alternative in these cities to provide some banking needs. I think it may not be to far fetched a thought to propose that to a degree adoption of cryptocurrency is occurring silently and possibly amongst the unbanked.

✍🏼 by Shortsegments

References:
1. https://www.fdic.gov/householdsurvey/
2. https://www.fdic.gov/householdsurvey/2017/2017execsumm.pdf
3. https://www.fdic.gov/householdsurvey/2017/2017report.pdf

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crypto serves humanity without discrimination. once they realized this, mass adoption lead to moon crypto ;)

True, I hope the awakening of others occurs soon.
🚀

I don't know how to respond in this kind of topic because it made me confused. Unbank, so it means they don't deposit their money because converted into online money? like bitcoin

I understand because the term sounds unbelievable. But yes these people don’t use banks for the most part. They exist in a cash economy and utilize Western Union, PayPal and lately gift certificates to convey cash because Western Union and PayPal are pricing themselves out of this cash economy.

There are also many unbanked people as they don't have relevant documents and IDs requested by the bank. This number goes up steeply for developing countries. Who would have imagined Georgia would lead in crypto adoption!

Yes, I agree this is another factor increasing their numbers. It’s ironic that in a “Free Country” that the lack of identifying documents can marginalize free citizens reduces their access to financial services.

the thing is that banks also look at the "cost" per client and they do not want to many "customers" that have little to no money. Those cost the banks to much and as such are silently discouraged.
But all this indeed leads to a higher adoption of alternatives. Now payday loans were a big part but now people are realising they have cheaper options in crypto and this also explains the growth.

The traditional banks and the loansharks are both digging their own graves

I agree. My reading suggests that companies like PayPal are digging their own graves with higher fees and more KYC requirements, while newer and cheaper alternatives are being created. I think crypto in general and Libra specifically are alternatives in this space.

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