Traditional Banks Not Optimized to Serve the Unbanked

For years, traditional financial institutions in different parts of the world have been attempting to narrow the financial exclusion gap by extending their services to the unbanked population. Yet for many reasons, these institutions still cannot avail their products and services to everyone that needs them.

Regulatory Hurdles

While there are several reasons cited for why banks are still not able to do this, their failure to serve this unbanked population has, on the other hand, led to the meteoric rise of fintech startups. Instead of relying on metrics often used by traditional banks when making a decision on whether to open a new branch or not, fintech startups such as Eversend are often primed to serve even those without regular incomes.

For individuals like Stone Atwine, a veteran banker who has been named in Forbes’ 30 Under 30 List for Europe, and Technology, the failures of large financial institutions have created opportunities. In addition to explaining why he thinks traditional banks have failed to close the financial exclusion gap, Atwine (co-founder of Eversend) also shared his sentiments on crypto, stablecoins, and Web3 with Bitcoin.com News.

Below are Atwine’s responses to questions sent to him via email.

Bitcoin.com News (BCN): You have worked for several conventional financial institutions and in different capacities. What can you say about their efforts to extend financial services to the unbanked? Do you see them ever succeeding at this, seeing that it has been several years since they started talking about financial exclusion?

Stone Atwine (SA): Traditional banking systems are not optimized for serving people without massive incomes. Branch networks, compliance systems, and limited efficiency do not allow them to serve the unbanked. The economics do not make sense for a traditional bank if they cannot earn a minimum amount of money from customers.

BCN: In your opinion, why are fintech startups doing a better job of bringing financial services to the excluded?

SA: Yes. Promising fintech startups can serve the excluded at a lower cost. But not at the bottom of the pyramid. Startups like Eversend try to help the customer increase their revenue. This is very attractive.

BCN: Since leaving the employment of banks, you now run a digital-only banking alternative for Africa and African diaspora payments platforms. Can you tell our readers about this digital-only banking alternative?

SA: Eversend is the all-in-one payments platform offering mobile-based cross-border P2P payments, virtual cards, stock trading, crypto, and asset-backed credit, focusing on Africa. In addition, Eversend is building crypto-fiat B2B and API-based payments services, including collections, payouts, and currency exchange.

BCN: What are some of the challenges facing fintech startups such as yours?

SA: The main challenge is regulatory compliance. African countries have multiple regulatory regimes, which means different laws and regulations.

BCN: What do you think is the best use case for the blockchain in Africa and why?

SA: There are many great use cases, but the leading one for me is not the most cutting edge like web3 and NFTs but solving a massive problem of cross-border business payments using stablecoins.

BCN: The Central African Republic recently became the second country after El Salvador to make bitcoin legal tender. As expected, the decision has divided opinion. Some have argued that it is not possible for a developing country with limited telecommunications infrastructure like the CAR to adopt bitcoin. Others have said the decision shows cryptocurrencies like bitcoin can act as an alternative reserve currency. What is your reaction to these views and sentiments?

SA: It may be a great move by the CAR to attract wealth and human capital. Builders like building for supportive regulatory environments. It won’t be surprising to see a few companies moving in the build around bitcoin and the lightning network.

But the criticism of limited electricity and internet access is legitimate as Bitcoin would not necessarily solve problems for the everyday person if access is restricted. That should not stop the CAR or any other country from being a fast and first mover in this space. There are always advantages to this.

BCN: Others have suggested that adopting stablecoins makes more sense than volatile bitcoin. However, the recent crash of the UST stablecoin appears to have upended this argument too. What is your view on this?

SA: Stablecoins need to be auditable and fully backed by fiat currency so that we don’t experience value loss when there’s a bank run. I do not support the idea of an algorithmic stablecoin today. UST is an example of what could happen.

BCN: Are central bank digital currencies the answer since cryptocurrencies and now stablecoins all seem to have challenges maintaining a stable value?

SA: Central bank digital currencies are an excellent idea for central banks and governments looking to have total control over their citizens. Still, they are not recommendable for the privacy of the said citizens. If I hand you a fiat note, the government will not know about that transaction. But with CBDCs, every single movement of value is recorded. Most people do not have anything to hide, but in my opinion, that would be a massive invasion of privacy.

Fully-backed stablecoins make a lot of sense.

What are your thoughts about this interview? Let us know in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.