Living through prolonged economic uncertainty has left many people frustrated with banks after years of mismanagement and excessive executive bonuses. Given that distrust, why do we keep relying on traditional financial institutions?
Public figures like Russell Brand have called for systemic change, and high-profile interviews have brought attention to those ideas. Yet those conversations often lack practical, sensible alternatives that people can actually adopt to free themselves from the current system.
Mobile wallets have yet to become ubiquitous, but they offer a promising path away from dependence on high-street banks. For example, Vodafone announced an ambitious goal in March to move many customers toward a “wallet-less” future. If large mobile operators succeed, mobile-based payments could become as common as physical wallets.
The reliability and customer service records of mobile network operators vary, so some people might prefer particular providers to handle their money. But what if you want to step completely outside regulated banking altogether?
Bitcoin is an obvious candidate. The digital currency, which many once thought would fade early in its existence, has shown remarkable resilience. It suffered sharp declines after events like the shutdown of the online marketplace Silk Road, but it recovered and gained value. Over a relatively short period its price rose dramatically, driven by investor interest and growing acceptance.
Supporters value Bitcoin for its ability to facilitate peer-to-peer transactions without central banks or traditional financial intermediaries charging fees and imposing controls. Official and third-party Bitcoin wallets are available for Android and BlackBerry, as well as other platforms. These wallets can enable contactless and NFC payments in locations that accept them.
Research from the Centre for Economic and Business Research (Cebr) estimates that 20 million shoppers will be using mobile phones to pay for goods and services by the end of this decade, and predicts the value of mobile purchases could triple to as much as £14.2 billion by 2018. The study forecasts that by 2020 mobile payments will account for roughly 1.4% of total consumer spending. While that share might seem modest, accelerating economic pressure and shifting consumer behavior could hasten adoption faster than expected.
For merchants, digital currencies can be significantly cheaper than traditional card payments. Co-founders Peter Gray and Rodolfo Novak of Coinkite—a Bitcoin-focused financial service—offer ways to buy bitcoins through systems such as Interac, and they provide merchant tools that bridge virtual currency with everyday point-of-sale systems. Standard credit-card transactions with Visa or MasterCard incur processing fees that reduce merchant margins; Bitcoin can avoid many of those costs.
Bitcoin transactions often eliminate the typical intermediary fees.
Access fees and account charges from established banks create barriers to formal financial services for many people around the world. Novak argues Bitcoin can help overcome that exclusion.
“Most of the world doesn’t have a bank account. We want them to bank with us,” Novak has said, highlighting the potential for alternative financial systems to reach unbanked populations.
Coinkite links virtual coins to debit cards and supplies card readers that let brick-and-mortar merchants accept bitcoin payments. Such infrastructure is key to increasing everyday usability and encouraging retail acceptance.
Small percentage fees on card transactions may seem insignificant in wealthier markets, but for people in developing countries those costs can represent a meaningful burden. Lower transaction costs can therefore have a real impact on financial inclusion and purchasing power.
Is it feasible to live entirely on Bitcoin already? Some people have demonstrated that it is possible, living and transacting primarily in bitcoin for daily needs. Their experiences show both the potential and the practical challenges involved in adopting a fully cryptocurrency-based lifestyle.
Is it time for a movement toward an “unbanked” society?
Want to learn more about bitcoin and blockchain from industry experts? Consider attending Blockchain Expo this January in London to hear from practitioners and leaders in the field.