The cryptocurrency market in Africa has seen a remarkable 1,200% growth in the past year, with countries such as Kenya, Nigeria, South Africa, and Tanzania among the top 20 countries on Chainalysis' global crypto adoption list.
Digital currency offers a solution for the millions of "unbanked" people across Africa who do not have access to formal financial services such as bank accounts. These people face many challenges and often remain in the trap of economic inequality.
According to the World Economic Forum (WEF), in sub-Saharan Africa, more than 100 million adults, or 16% of adults, are unbanked and have no official identity. Fortunately, Web3 applications that can be placed on mobile phones provide solutions for the unbanked population, enabling them to make instant payments at low cost, even across international borders.
Speaking to Telo News about using blockchain innovations to solve this problem, Owen O'Driscoll, co-founder and CEO of PlanDail, said: “There are two main approaches to solving the problem of financial exclusion in Africa. The first approach involves targeting a large population of people with older phones that can run simple wallets. This approach assumes that adoption will be higher among this population, but may be limited by the inability of these phones to provide full access to financial services. The second approach involves targeting those who own smartphones, which provides full access to financial services. However, smartphones are expensive and may be out of reach for many people in Africa.
O'Driscoll suggests that a middle ground approach is likely to emerge that involves a combination of trusted parties operating a trusted identity network.
“This approach requires minimal trust, but this may be slow to build due to adoption challenges. However, using blockchain technology in its full capacity for regenerative finance holds the most promising potential. This approach involves providing directed liquidity to communities with a transparent ledger and verified credit in a sustainable and profitable manner. CEO of PlanDail pointed out that Crowdfunding, web3 and DLT can be the driving force and key to making this happen.
Key Web3 innovations driving financial inclusion in Africa include:
Blockchain technology:
Increasing efficiency, reducing costs and improving security in the African payments industry, through several platforms currently being developed and emerging.
Digital currencies:
Growing adoption in Africa by startups offering crypto payment solutions to reduce transaction costs and increase financial participation in countries with high inflation rates.
Mobile payment:
Rapid growth in adoption across Africa, with the emergence of new services and agents, including mobile banking, digital wallets, and P2P payments.
Cross-border payments:
With the impact of intra-African trade, companies are developing more efficient and cost-effective solutions such as blockchain-based platforms, mobile money interoperability and digital currencies.
In addition, more than 80 million adults without accounts receive cash payments from the government, which could be digitized for affordability and reduced corruption.
Increasing account ownership and account usage requires trust in financial service providers, confidence in using financial products, appropriate product design, and a strong consumer protection framework.
Brought to you by: Soroosh R&D team
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Written by
@godofweb3