More than 1.7 billion people worldwide don’t have a bank account.

Known as ‘unbanked’, in the UK about 1.2 million people fall into this category while around one in five Americans are affected.

Many are homeless, migrants or asylum seekers but some are unbanked because they don’t have a steady income or enough money to run an account.

Others may be barred due to bad credit history or their circumstances are unstable; changing address often.

Many therefore cannot join the legitimate economy and are forced to work illegally, get paid in cash and run the risk of being exploited.

They cannot claim benefits or access credit, both of which require a traditional account to receive payments. Neither can they build up wealth, make long-term investments or take out a mortgage. 

Companies – from electricity providers to mobile phone networks – are known to offer reductions for direct debit payments. The UK ‘poverty premium’ due to missing out on preferential deals is over £400.

In my view, this situation is unacceptable and soon, it may be unnecessary. 

We’re living through the dawn of a new global economy fuelled by cryptocurrencies, which are new forms of digital money that work without central banks.

Bitcoin was the first, created in 2009, but there are now many, many more versions that can be used for any financial purpose.

Savers could buy it as an investment, for instance, while you can also make purchases from major companies like Microsoft and Pizza Hut, who have experimented with accepting it.

Instead of a bank account, crypto revolves around ‘wallets’ – the name for software or hardware that can be used to buy, sell, trade or invest in these online currencies just like traditional money.

There are many reasons why this digital money can improve upon the existing financial system.

Crypto is truly borderless, which is one reason why it can help the unbanked

Bitcoin and other cryptocurrencies have no central authorities such as a government or central bank which means no middlemen messing things up through poor economic policymaking or out-and-out corruption.

To understand why this is important, just imagine the people stuck in a country that’s experiencing hyperinflation, such as Venezuela, or a nation gripped by bank runs (when people rush to withdraw money amid fear of losing it all during economic crises).

All the citizens in these countries have savings and earnings locked into currencies that are becoming worthless and there’s no means of escape, because who’s going to buy their devaluing currency?  

If they were using crypto in the right way using the right wallet, no one could forbid them from taking out their money.

If trouble happens in their home country or politicians run the economy into the ground, it doesn’t necessarily affect their money because digital money is transnational.

Crypto is truly borderless, which is one reason why it can help the unbanked.

To start using it you don’t need to have a home address or ID documents, both of which are generally required to open bank accounts.

All you need is an internet connection and a digital device, meaning that it’s perfectly possible to enter this new economy using little more than a smartphone and the wifi at a local library.

Although many of the biggest Bitcoin exchanges require the use of a bank account or credit card to buy, crypto can be purchased without using traditional payment methods.

It can be done in person using a service like LocalBitcoins, which allows people to meet in real life and arrange an exchange using their smartphone. If you have cash, it can also be bought from physical ATMs.

Cryptocurrencies can be transferred using a function that’s built right into wallets and can also be earned just like real money.

So, if you’re a rural farmer living in a developing country, you could open a free wallet and simply accept payments digitally without having any of the funds pass through a bank account.

Today, some forms of digital cash may seem expensive – which shouldn’t be thought of as a barrier to entry. Bitcoin, the most valuable denomination, hit a high of more than £45,000 this year. But you can purchase it in smaller amounts if you don’t have thousands to spend.

If you want to take control of your crypto holdings, it’s worth choosing a ‘non-custodial’ type of wallet. With a non-custodial storage method, the money wallet is kept secure using a passkey, which no one else but the owner knows, as opposed to a custodial wallet where it’s stored by the company that makes the wallet.

We’re already starting to see the adoption of Bitcoin in developing countries

Choose the right wallet and you can effectively become your own bank and start trading internationally. 

There are some limitations, though. It’s still in the relatively early stages development, so there are a few potential pitfalls to look out for.

The price of Bitcoin and other coins is volatile – its price can change rapidly – while there have also been high profile attacks on centralised exchanges (sites where people buy and sell crypto).

Investors must take care to avoid scams and there have been incidents resembling Ponzi schemes which has resulted in victims losing large sums of money. With freedom comes responsibility, so you should be as cautious with virtual dosh as you would be with traditional money.

But we’re already starting to see the adoption of Bitcoin in developing countries. 

In El Salvador, President Nayib Bukele recently passed a bill that made Bitcoin legal tender, making it the first country to do so. He even suggested powering crypto-mining – the process by which new coins are generated – using volcanoes as a green power source.  

El Salvador is a low income country, 70% of citizens are unbanked and roughly one quarter of El Salvador’s population lives in the US, where they send back vast amounts of remittance payments to families at home. 

It’s been suggested these payments make up 23% of the country’s gross domestic product (GDP), with almost $6 billion sent back last year alone.

In the future, these payments could be made using crypto and fees would be dramatically reduced, meaning less wasted money for the people concerned.  

If you’re a millennial or a member of Gen Z, you’re used to the idea that the financial system is rigged against you – statistically, you are poorer than your parents were at the same age.

In Britain, Boomers are estimated to control roughly 80% of private wealth and ‘intergenerational inequality’ is growing as young people’s wages have stagnated for more than a decade.

Younger generations are also faced with house prices which have soared by more than two thirds in nearly 50 years.

When you can’t get a mortgage, and are paying vast sums of money to live in a pokey suburban flat, the world can look more than a little unfair. 

If you’re unbanked, the situation might look even more hopeless. But think smart and with crypto there’s a chance that you could improve your finances and, ultimately, change your life.

It is a hopeful alternative to a financial system that has let down two generations and billions of unbanked people. And anyone can join the revolution.  

Do you have a story you’d like to share? Get in touch by emailing [email protected]. 

Share your views in the comments below.

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