REPORT: How crypto isn’t going to solve the problem of the unbanked

How seasoned crypto investors dread the words unbanked and underbanked



When a crypto entrepreneur utters the immortal words, ‘We are catering for the 2 billion people who are unbanked,’ this should be taken as a warning sign.

It is the equivalent of a wannabe coffee shop entrepreneur saying that the coffee shop market is worth $200 billion and by capturing only 2% of this huge market he or she is certain of achieving glory.

Of course the coffee entrepreneur fails to consider how difficult it is to take a 2% share of any market. By uttering this statement it is a clear sign of naivety. It is a sure way to put off an investor and is your best chance of leaving the investor’s office via the window!

The crypto entrepreneur who announces that they plan to target the unbanked or underbanked, a market of around 2 billion people, sounds good on paper but it is old hat. People have been talking about catering to the unbanked for years. But most of them haven’t realized the reality of the problem.

What is the unbanked problem?

The problem isn’t just an African one. The Federal Reserve estimates that one fifth of the US population is unbanked or underbanked. These are people who don’t have access to financial services, in particular a bank account. Many have to utilize payday loans and check cashing, paying exorbitant interest rates in the process.

But there have been some developments over the years that have made it easier for people without bank accounts to operate.


One solution are services such as Cash App and Venmo. Another aid to the unbanked are prepaid debit cards. In the developing world there have been solutions such as M-Pesa, mobile based banking platforms that allow users to transfer and store money on their mobile phones.

In the last few years crypto entrepreneurs have been jumping on the unbanked bandwagon suggesting that their new cryptocurrency will overcome the problems of the unbanked and underbanked by reducing fees, reducing the requirement for identification and offering borrowing and lending without the need for a credit score.

Of course this all sounds good and many of the crypto solutions do exactly that. But that is unlikely to solve the underbanked problem.

What is the reality of the problem?

The cause of the underbanked problem aren’t the high fees of transferring funds across borders, the high cost of micro payments or the fact that people do not have a credit score and are unable to access financial services. The cause of the problem is that the unbanked don’t have enough money. That was the finding of numerous surveys, the most recent of which was conducted by the World Bank. They found that 59% of the people who are unbanked blame the lack of money as the cause. 21% claimed they didn’t need a bank account.

The unshaven, disheveled dynamic sounding crypto entrepreneur isn’t going to solve the unbanked problem with his new cryptocurrency that promises to be faster and cheaper than any other or his DeFi platform offering borrowing and lending without the need for ID. The solution is for another discussion entirely, probably involving incentives, grants, training and other macroeconomic chit chat.

So when the next crypto entrepreneur claims to be solving the unbanked problem, pat your unshaved friend on the back and thank him for unintentionally saving you valuable time and precious money. Next!


No Financial Advice

This report does not constitute financial advice or a recommendation to buy in any way. Always do your own research and never invest more than you can afford to lose. Investing in cryptocurrencies is a high risk, and you could lose 100% of your investment.