Cue The Bit-Peso – Unbanked And Potentially Bitcoined
We stand poised on the cusp of something altogether new. A huge percentage of the human race is either “unbanked” or “underbanked”, that is to say that maybe half of humanity either does not have a bank account of any sort and/or makes limited use of banking institutions or uses other non-bank institutions or informal financial services to conduct their financial affairs.
There are a variety of reasons for this. Many hundreds of millions of people live in rural and urban areas of developing or underdeveloped regions where there simply are no banks. They live in societies with poorly developed financial service sectors and there may be no banks in the towns and villages where they live. Or maybe there is a bank, but the bank may require documentation to establish an account that simply does not exist. In many areas of Asia, Africa and Latin America there simply is no door-to-door mail delivery. There is therefore nothing corresponding to a mailing address. Many streets and alleys do not even have names. Beyond that, there may not even be electrical service, no gas service and no municipal water or sewer service.
So when a commercial bank, for example, requires potential customers to bring in a paid utility bill with the resident's name and address on it, or a pay check stub with their name on it, to establish a new account, for many millions of Africans, Asians and Latin Americans, that is a complete impossibility. Where they live there are no street names, the houses and shacks have no numbers, and there is no mail delivery, and perhaps no electricity or gas or water or sewers, either. Additionally, they may work on an informal, cash basis, in a day labor arrangement. So they simply cannot provide pay check stubs and utility bills. These simple realities of daily life constitute insurmountable barriers to entry into the formal economic system for a very large percentage of humanity.
It is not surprising, therefore, that research conducted by McKinsey & Company and The Financial Access Initiative has shown that fully 2.5 billion members of the adult population of this planet do not use banks or microfinance institutions for either savings or loans. Almost 2.2 billion of these individuals are in Africa, Asia, Latin America and the Middle East. That is half of the world's adult population.
But this phenomenon of being “unbanked” or “underbanked” is hardly restricted to people in countries on the periphery of the so-called “developed” world. Even in the USA, 28.3%, or more than one in four households, are “unbanked” or “underbanked.” They either do not have bank accounts at all, or only partially use formal banking institutions to meet their financial needs. They avail themselves of other arrangements such as money transfer services, check cashing outlets, supermarket bill paying counters, prepaid debit cards, and the like.
These Unbanked Masses Are Ripe For Bitcoin-Based Financial Services
The abject, unabashed failure of the formal, commercial, central-bank-based financial services sector to serve fully half of humanity represents a tremendous opportunity for Bitcoin visionaries and entrepreneurs. It is not a question of taking market share from the commercial banks. It is a question merely of offering financial services – in some cases for the first time --- to a vast, unserved and underserved segment of the global population that the commercial banks have not bothered to concern themselves with.
That represents a massive opening for Bitcoin, a decentralized, digital, global, rapid, crypto-currency that is well suited to operations out of the orbit of the commercial, central-bank-based financial services sector.
All of the pieces of the puzzle are already present on the global playing board to do this. It but remains for the Bitcoin community to assemble them in a slightly different way, and the effect on global finance could shift very powerfully and quickly to the advantage of the half of humanity who have been largely shut out of normal commerce and economic activity.
Bear with me for just one moment. It all has to do with the marriage of the burgeoning network of mobile communication devices (cell phones, tablets, etc.) and the Bitcoin network and technology.
The continent of Africa now has more than 650 million mobile phone subscribers, more than the EU or USA. In Latin America 98% of the population have a cell phone signal, while 84% of all households have a mobile phone. In the Asia-Pacific region there are more than 2.5 billion mobile phone users, 180 million users in Indonesia, 581 mobile phone users in India, and so forth.
In other words, the very regions where there are teeming millions of “unbanked” and “underbanked” adults, are the same regions where mobile phone use is all but universal.
Clearly, for Bitcoin as a decentralized, global, digital, crypto-currency, the vehicle to penetrate this vast market is via the hand-held mobile communication device – the mobile phone, cell phone, tablet, call it what you will. The culture in the underdeveloped and developing countries the world over has already resoundingly embraced cell phone technology. In less than two decades the humble cell phone has completely penetrated global society, from Bolivia to Namibia to Madagascar to Indonesia.
The challenge for Bitcoin developers is to bring basic Bitcoin functionality to the ordinary cell phone. Bitcoin applications need to be developed that are configured to use the USSD protocol and the SIM card. The global Bitcoin network is here and growing. Near universal adoption and use of mobile telephones is also here, east to west, north to south. The task is to marry the two and open up a vest, untapped market. If the USSD protocol and the SIM card stand in the way of making Bitcoin easily available to a couple of billion new users, then the best technical minds in the Bitcoin community need to resolve those issues, in consultation with the major cell phone companies. In the case of Latin America, that would include at least Claro (América Móvil) and Movistar (Telefónica). These are two of the largest cell telephone companies in the world. In Africa, the major cell phone providers are Vodafone, Telefónica, Airtel, Orange, Beeline, MTN Group, Etisalat and Qatar Telecom. In Asia there are many providers, but India’s Bharti Airtel seems the obvious potential initial Bitcoin collaborator, due to its size globally and its massive penetration of the Indian subcontinent, and also African, cellphone markets. Crack the Indian, Latin American and African cell phone markets and the world will lie open before Bitcoin. The key is to integrate cell telephone technology and the Bitcoin network. Once one of the major global cell phone companies, such as Airtel or Telefónica, buys into the Bitcoin concept it will radically alter local and international commerce.
M-Pesa Shows the Way
Beyond that, a unique, mobile-phone-based payment and financial services system in Africa has already shown the way for Bitcoin. The M-Pesa system in use in East Africa lets people use their cell phones to deposit, withdraw, send and receive money. There are no banks in the transaction. The mobile phone companies host the service. The money is stored in an account on the cell phone. It is a peer-to-peer payment service. There are 17 million users in Kenya alone, and 5 million in Tanzania. The service has even recently been introduced into Afghanistan.
This is the model for Bitcoin. The M-Pesa system (pesa means money in Swahili), has obvious implications for Bitcoin's future. Indeed, I would say that if Bitcoin does not very rapidly go this route that it is destined to wither and die.
Bitcoin visionaries and entrepreneurs must move quickly and decisively, along the lines being sketched out here. Why not develop a Bit-Peso system for Latin America, Spain and the Philippines, for example? Seven Latin American countries and the Philippines currently use the “peso” as their national currency. Eleven other Latin American countries used the peso in the past, as did Spain. Two African countries also used the peso in the past. So the moniker, Bit-Peso, could have reflexive cultural resonance in Latin America, Spain and the Philippines, as M-Pesa does in the Swahili-speaking region of East Africa. For that matter, why not a Bit-Pesa for East Africa, a Bit-Franc for French Africa, a Bit-Dinar for the Middle East?
Bitcoin as we know it now is very “techie” and computer “geeky”. That has to change and fast, or it will not and cannot be used by the great masses of humanity. Applications must be developed that are very secure, always, every time, but that are non-techie, non-geeky, and user friendly for the typical person in the developing world who can operate a cell phone, but knows absolutely nothing of computer programming, algorithms, hashes, the block chain, cold wallets, secondary authentication, etc.
The whole process must be made as streamlined and easy as taking a picture with a cell phone, or texting a message.
Or like using M-Pesa in Kenya and Tanzania. That's the model. If the Bitcoin community can take the East African experience and modify it for global use, by marrying Bitcoin, mobile phone use and the commerce of everyday life at the face-to-face level, then it will have mass acceptance and sweep like a wave through Latin America, Africa and Asia.
Self-disclaimer: I live in South America, on a street and in a neighborhood where there is no daily, door-to-door mail delivery. I also have rarely used banks for more than ten years, among other reasons because I have little money; consequently I do not have any money in any bank, do not have a credit card and probably could not get a bank account or credit card either, for some of the same reasons I have set out above. I do not have a job in the formal economic sector, so I cannot supply a pay check stub. I also do not pay a water or electricity or gas bill, as I live in a small rented room. So I cannot provide a utility bill in my name either.
However, I do have a cheap, prepaid cell phone. And I do at this moment have a small fraction of one Bitcoin.So I myself am very much a part of the unbanked and underbanked half of humanity that has a cell phone, and could potentially benefit from the very Bit-Peso scenario that I have developed in this article.