Crypto can boost economic welfare in underbanked regions

The world’s economy is rapidly evolving, yet financial exclusion remains a persistent issue. A 2022 report by Visa revealed that 2.1 billion people globally remain unserved or underserved by digital financial services. This gap often traps individuals and businesses in underbanked regions in a cycle of limited growth and opportunity.

The good news? Emerging technologies, especially cryptocurrencies, present an opportunity to rewrite this narrative. Merchant adoption of crypto payments has the potential to significantly uplift the welfare of these underbanked economies.

Inflation is crippling cash

It is getting harder and harder to rely on cash in economies with significant inflation and price instability. Local currencies have depreciated so much in nations like Argentina, Venezuela, and Zimbabwe that regular cash transactions are fraught with inefficiencies.

Stablecoins that are linked to fiat currencies, such as Tether (USDT) and USDC (USDC), or cryptocurrencies like Bitcoin (BTC), can save the day. In enabling safer, peer-to-peer transactions without relying on erratic local currencies, crypto can help businesses protect their revenue value. Crypto payments are less susceptible to the inflation rates that cause cash to depreciate. This is invaluable to regions in which central banks struggle to preserve economic stability.

The shift is already evident. According to a 2022 Deloitte survey, 93% of merchants accepting crypto reported positive impacts on customer engagement and satisfaction metrics. As more merchants recognize that crypto allows them to offer more efficient transactions, consumer trust is enhanced. In the long term, this galvanizes more sustainable economic activity.

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

Rising rates of crypto adoption among merchants are also bolstering cross-border growth. Crypto’s ability to provide reduced rates and faster settlement times is starting to make traditional SWIFT-based banking systems appear all the more archaic. Smaller businesses, in particular, can trade more effectively with the help of cryptocurrency payments, swerving excessive fees and reducing the risk of volatile exchange rates. 

Additionally, decentralized currencies can guarantee transparent financial transactions and minimize corruption, which is essential for economic stability in lower-income areas. The resulting shift toward crypto ultimately leads to the expansion of local commerce, which has an inevitable, favorable impact on the wider economy. 

Micropayments: A game-changer for financial inclusion

The willingness to accept crypto also opens up a largely untapped opportunity to promote financial inclusion.  In underbanked regions, where daily income might be as low as a few dollars, traditional banking fees render small transactions impractical. Cryptocurrencies, however, enable frictionless micropayments with minimal fees, unlocking a new frontier for commerce.

If farmers, for example, can sell produce in small increments without losing significant revenue to transaction costs, profit margins increase and consequently create strong financial activity in local economies. Similarly, crypto gives service providers, like ride-share drivers or local artisans, the opportunity to receive smaller payments instantly and directly, bypassing middlemen. This embeds a sense of fluidity into the fabric of day-to-day transactions.

As crypto is more widely adopted, it will also become more feasible for things such as pay-as-you-go household utilities to be dealt with in micropayments. This can eradicate the need to pay large, up-front, unaffordable costs in communities that struggle to stay above the breadline. In this sense, crypto-powered micropayments have the potential to change lives.

Businesses in emerging and developing markets serve an underbanked yet youthful and tech-savvy population, 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 present an even more powerful and convenient alternative.

By offering greater accessibility, lower transaction costs, and borderless capabilities, cryptocurrencies empower businesses to serve this demographic with seamless, reliable, and inclusive financial services. For these markets, crypto adoption could redefine financial ecosystems and accelerate economic participation.

Key considerations for payment solution providers

While the promise of crypto is undeniable, it’s not a one-size-fits-all solution. It’s crucial that payment providers address several key factors when developing systems tailored to underbanked regions. 

For a start, solutions must be designed with inclusivity in mind. Many underbanked individuals lack access to sophisticated technology, so systems should work seamlessly on basic smartphones or even feature phones. User interfaces must be intuitive to encourage widespread adoption. 

Tied to this is the need to facilitate adequate awareness with educational resources. Crypto can seem intimidating to first-time users. Payment providers should invest in educating both merchants and customers on how crypto works, how to leverage its benefits, and how to navigate risks truly. Financial literacy campaigns will play a critical role in building trust and widespread adoption from both merchants and consumers.

Regulatory compliance is also a challenge that needs careful navigation. Operating in underbanked regions can be a complex process in this regard. Providers must work closely with governments to ensure compliance while advocating for clear, supportive policies that enable innovation. Above all, security is paramount. Providers must implement robust fraud prevention measures. Hacks and the fear they perpetuate among new users are often a primary cause for slow adoption and severely undermine any progression of trust.

Final thoughts

The integration of cryptocurrencies into merchant ecosystems in underbanked regions is more than just a technological shift—it’s an opportunity to drive economic welfare and foster inclusion.

Cryptocurrency payments have the potential to be a potent equalizer in the global economy by resolving the shortcomings of conventional payment systems, enabling companies to conduct business internationally, and helping people avoid the traps of cash dependence.

However, cooperation between local communities, governments, and payment solution providers is essential to success. The adoption of cryptocurrency payments has the potential to become a major component of financial inclusion for billions of people globally, surpassing the status of a specialized trend with the correct tactics.

Meryem Habibi

Meryem Habibi is the chief revenue officer of Bitpace. With an extensive background in marketing, communications, and sales within the fintech industry, Meryem brings a wealth of knowledge and expertise to the table. Having worked with industry giants such as Samsung and Diebold Nixdorf, Meryem has collaborated at the board level on strategy development, revenue stream diversification, risk management, and unlocking growth opportunities in emerging markets. Meryem is passionate about delivering seamless, user-friendly products to an increasingly progressive and groundbreaking industry. With her dedication and experience, she plays a pivotal role in driving Bitpace towards its goals of innovation and success.