Disclaimer: The author’s views and opinions expressed in this article are solely their own and do not represent the views and opinions of crypto.news’ editorial team.
For a long time, traditional finance has been failing, but its flaws have been overlooked. However, under the current economic challenges, these flaws can no longer be ignored. Approximately 1.4 billion people are still unbanked, with around one-fourth of the global population being excluded by an exclusionary and inefficient financial system.
Traditional financial institutions continue to exclude those who lack access to documentation, credit histories, or stable infrastructure, due to their outdated models. This model disadvantages a certain class of people, and there have been no significant changes over the years to increase inclusion. However, blockchain and the new generation of neobanks may have the solution to financial inclusivity in the digital age.
Traditional financial systems have outdated processes that are unmanageable in today’s fast-paced digital era. For example, international money transfers can take days to finalize and come with hefty fees. Remittance charges can reach an average of 6.35%, which is significant for developing nations.
Neobanks built on blockchain infrastructure are changing this. These platforms eliminate the need for intermediaries, making transfers faster, seamless, low-cost, and almost real-time. Decentralized networks remove the obstacles imposed by traditional banks, creating a financial system that serves everyone, not just a privileged few.
Financial inclusion is more than just access. Banks have been criticized for overcomplicating onboarding processes and making key financial services inaccessible to socially disadvantaged individuals. Most of the unbanked population lives in developing regions where financial institutions either don’t operate or have imposed insurmountable barriers to entry. Neobanks are challenging this by adopting decentralized models and behavior-based identification through the blockchain, which can make banking accessible to those who would otherwise be locked out.
The traditional perception that your funds are safe and untouched when deposited in a bank is an illusion. Banks have complete access to your funds and can use them for lending, investment, and other purposes. Most banks operate under a vulnerable fractional reserve banking model, making them prone to collapse. Neobanks offer a solution to this issue by providing non-custodial accounts, where users retain full ownership and control over their assets, without any rehypothecation by the bank or third parties. This autonomy is crucial for financial resilience, especially during times of economic uncertainty.
Traditional finance has a major shortcoming when it comes to data. Centralized systems accumulate vast amounts of personal information, making individuals vulnerable to data breaches and cybercrime. Blockchain-based neobanks decentralize data, allowing individuals to retain control over their personal information and reducing the likelihood of data breaches.
The volatility of cryptocurrencies is a major concern for many users when it comes to neobanks and blockchains. However, stablecoins offer a solution by providing the stability of traditional currencies while leveraging the speed, transparency, and security of blockchain technology. They allow users to avoid the risks associated with volatile assets, ensuring stable and predictable financial transactions.
The future of finance will inevitably revolve around stablecoins, as they offer a clear path to financial inclusion without exposing users to the high-risk nature of the broader cryptocurrency market. These digital assets make financial services accessible, transparent, and reliable for anyone, anywhere.
Traditional finance is failing the world, and decentralization is the solution. Banks have held control over money for too long, dictating who can participate in the financial system and leaving billions of people behind. This broken system cannot be repaired, and it’s time for something new. Blockchain-powered neobanks offer a decentralized, inclusive, and transparent alternative, representing the future of finance where everyone can participate, regardless of location or financial background.