Written by Jonny Fry
Writers linkdin: https://www.linkedin.com/in/jonnyfry/
At Digital Bytes we are often asked where the inspiration for analysis comes from and how we decide on what to write about. Well, occasionally we post an article on social media which seems to grab readers’ attention, resulting in thousands of views. This post on LinkedIn about the success of El Salvador securing 70% of the country’s previously unbanked population to be signed up with a digital wallet in just 45 days certainly did catch readers’ attention.
Relevant to this subject, according to the World Bank, there are 1.7 billion people who do not have a bank account and are therefore typically excluded from being able to access basic regulated financial services - such as borrowing, investing and lending. Several reasons exist as to why the unbanked fall foul of higher charges: in order to pay for basic utilities such as electricity and gas, to use cash meters, or to pay for more expensive mobile/cell phone fees by having to resort to pay-as-you-go contracts they are often forced (in order to borrow money) to pay considerably more for their loans by ‘back street lenders’. Whilst most of us are familiar with the challenges of inadequate banking provision in parts of Asia, Latin America or Africa, surprisingly in the US (the world’s biggest economy), 63 million Americans are unbanked or underbanked - an average of $3,000 in annual costs per person. Rationale would suggest that if the proportion of a country’s population who are unbanked can be reduced, then this can not only significantly help the unbanked but can help to increase the GDP of the country as a whole.
The following table shows a summary of the viewers who looked at the above-mentioned LinkedIn post about El Salvador. What is interesting to note is where the LinkedIn viewers are based (i.e. a broad selection of countries) and also the global financial institutions in which the LinkedIn viewers typically work. Could this be an indication that some of the largest financial services companies in the world are looking at the unbanked as a target market? After all, 1.7 billion people (often based in some of the fastest growing countries) could be very profitable and long term for these institutions. Or is this just too cynical?
Summary of viewers of LinkedIn post about El Salvador.
The next question is, which countries are likely to follow El Salvador? Well, according to Investment Week, Panama, Paraguay and Guatemala could all well be looking at having Bitcoin as legal tender for goods and services. Whilst these countries are economically small, it is certain that the US is keeping a close eye on developments since the more countries which legalise Bitcoin, the less people there are using the US$. Given growing inflationary pressures in the world and rising interest rates in the US, the IMF is raising concerns about global growth rates. This does not bode well for many debt-ridden weaker economies historically reliant on the US so will we see more and more countries look for an alternative to the US$ and their own debt-ridden national fiat currencies, and embrace Bitcoin?