Unlocking blockchain for the underbanked

by Jackie Hyland or techcrunch.com

As 2015 came to a close and the new year began, many thought leaders in the financial technology space made their predictions on the trends and innovations that will get us excitedin 2016.

One of the most prominent technologies that repeatedly appeared on these lists was the blockchain. More familiarly known as the technology behind the bitcoin digital currency, blockchain has emerged from the shadows of bitcoin with a new, solo image.

In an age when companies are looking for innovative ways to optimize internal processes, make and verify transactions and increase data management and security practices, the blockchain stands out as the candidate to solve their problems.

Simply put, blockchain is a public ledger of transactions distributed among a large network of computers without a central authority. Bitcoin still remains the largest example of the blockchain technology, but there have been other examples of distributed ledgers springing up around the world.

In bitcoin’s early years, using the blockchain on a large scale was just as strong a technology as a philosophy and belief in a new decentralized economy that would serve the masses. Hence, it’s no surprise that many startups in the space see that blockchain has a fitting case for financial inclusion to provide better, faster and cheaper financial services to those who are outside or heavily burdened by their local formal financial systems.

At Accion Venture Lab, we have reviewed and spoken to a multitude of early-stage companies looking to use both bitcoin currency and the underlying blockchain technology to expand financial services throughout different emerging markets.

Companies — like BitPagos, Bitex.la, Bitso, Volabit, Wayniloans and Blinktrade in Latin America; BitPesa, Atlas and Switchless in Africa; Coins.ph in Asia; and Abra and Allaire in the U.S. — are trying to tackle real problems and inefficiencies in the market, whether in payments, lending or remittances.

In the mix of bitcoin and blockchain-only business models, we’ve repeatedly seen that the poor need a reason to care about bitcoin as a currency. Underserved customers won’t see benefits to using bitcoin for its inherent coolness; rather, they need it to simply and easily address a pain point or make their lives better.

How can the blockchain begin to have real meaning in the lives of the two billion excluded individuals around the world?

Bitcoin ends up being a complicated concept that, unless attached to a trusted fiat currency or local mobile money system, has no value. Unless there is an ecosystem in which bitcoin is accepted ubiquitously in an underbanked person’s world, is a regulated and trusted form of value and is easily accessible, it will mean very little to those without access to financial services.

So, the question remains, how can the blockchain begin to have real meaning in the lives of the two billion excluded individuals around the world? There are a few ways we believe blockchain can help revolutionize access to financial services for the base of the pyramid in the near future.


As mentioned previously, the cost of remitting money averages 8.4 percent globally, driven in large part by the legacy brick-and-mortar distribution networks and multi-bank settlement chains of incumbents like Western Union and MoneyGram.

Using the bitcoin blockchain as a back-end to transact local currency provides a clear way to ensure that the customer can feel comfortable with the product, while also receiving the cost and technology benefits of the blockchain technology.

Using the blockchain in this fashion will not only lead to more value accretion to remitting customers, but it will also be the kind of radical value proposition improvement that will be required to attract customers and break them from established habits around sending and receiving money.

Similarly, the blockchain can be used in remittances to enhance pricing transparency and provide better transfer security, as well as be used as an on-ramp for other technology driven financial services. It’s important to also consider that while blockchain can help lower costs and smooth transactions, it alone does not make a company poised for complete success -– there are other huge components of a remittance startup that need to be taken into consideration, such as cash-in/cash-out points and a unique customer acquisition strategy.

Property rights

Property rights have long been a source of conflict and pain for many lower-income individuals. Formalizing property and expanding formal information networks for the base of the pyramid allows low-income property owners to enter the formal financial system and generate collateral for financial products; it also provides legal protections and visibility in the local formal economy.

Companies like Suyo in Colombia and Landmapp in Africa are using innovative technologies to bring down the cost of land titling and formalization. While they are not using the blockchain to maintain their databases or connect with the local governments, there is a huge potential to do so.

For example, decentralized record-keeping startup Factom has partnered with the government of Honduras on a new land title registry initiative to develop “a permanent and secure land title record system” using the bitcoin blockchain, the distributed ledger that tracks all land title transactions across the Central American nation.

Digital identities

Similar to property rights, many base-of-the-pyramid individuals do not have access to traditional financial services because they lack verifiable identification. Governments and individuals alike understand the complex nature of identification, and while some low-income individuals prefer to remain anonymous, the systematic and individual costs of doing so remain very high.

By using the blockchain, individuals can receive a digital identity for transacting value nationally and internationally with relative ease. For example,Bitnation is using blockchain to help solve the refugee identity crisis in Europe. Their system currently helps Syrians get an “emergency ID” in order to cryptographically prove individual identity and family relationships.

Similarly, at Onename, usernames are created within an open namespace and user data is embedded directly into the blockchain to help individuals who want to voluntarily identify themselves, even when local governments make it difficult to do so. This would give those typically excluded from the financial system a way to potentially open their own bank account, send money across borders and even apply for loans. Users can voluntarily identify themselves via the blockchain, and may be granted access to health care, social services, job opportunities, and more.

In addition to the above possibilities, we know there are more great ideas out there, and these are just a few as to how the blockchain could support the underbanked around the world. We have not invested in blockchain technology yet, but perhaps as all the experts have advised, this may be the year we find a worthwhile venture.


The article first appeared in Techcrunch.com