BlogCommunityHow Decentralized Finance Paves the Way for Financial Inclusion

How Decentralized Finance Paves the Way for Financial Inclusion

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According to the World Bank’s report from 2017, approximately 1.7 billion people worldwide don’t have a bank account today. 

Not having access to this fundamental financial instrument is the main factor that stops them from realizing certain everyday functions. However, decentralized finance (DeFi) was created to meet all the requirements and demands of traditional banking — security, privacy, and accessibility — in a new way. 

By transferring financial operations onto the blockchain, people will only need a smartphone or portable PC and a stable Internet connection to access the global financial system 24/7. How’s that for a step in the right direction?

In this article, you’ll discover how the current worldwide financial inclusion works, what DeFi is, why it’s the best choice for banked and unbanked people to manage their money, and how you can start investing in the space.

The Current Financial Inclusion Situation Worldwide

Individuals and enterprises who are financially included have access to financial goods and services that fit their requirements — transactions, payments, savings, credit, and insurance — offered by big institutions with all their benefits and drawbacks.

Access to a bank account in the current financial system is the first step toward economic development since it allows people to store their money safely. However, a bank account’s most crucial function is to be the portal to other financial services.

For nations where 80% or more of the population has bank accounts, the next phase is to transition from account access to account usage (China, Kenya, India, and Thailand). These nations depended on reforms, private-sector innovation, and a drive to build low-cost accounts, including mobile and digital payments. 

Everyone Needs Financial Non-custodial Services

The four main reasons why people can’t have a bank account are as follows:

  1. Lack of access to nearby banks / mobile phone
  2. Minimum balance fees
  3. Distrust of the banking system
  4. No access to government-issued ID
How Decentralized Finance Paves the Way for Financial Inclusion

Source: Ask careers

Unbanked Needs DeFi Now

These four causes are still valid in developing countries. Most people who need financial tools (a loan, for example) usually get that money from friends or family simply because the bank requirements are unattainable.

The lack of long-term financial system policies that guarantee digital and physical infrastructure to attract telecommunications and banking investments makes opening and maintaining a bank account a script for a fiction movie in developing countries.

However, it’s not that rosy in the developed world either. For example, the Federal Reserve estimated in 2019 that approximately 63 million people don’t have a bank account. 

Therefore, unbanked people in every country of the world desperately need a much simpler, secure, and private financial alternative. Decentralized finance is establishing itself as the best answer to grant anyone access to a DeFi Wallet24/7.

Banked People Also Need DeFi

According to MyBankTracker, these are the top 10 most common bank complaints:

  1. Excessive / hidden fees
  2. Bad customer service
  3. Check/funds essential bouncing
  4. Expensive debits charged first
  5. Loyalty means nothing
  6. Mortgage / loan issues
  7. Huge errors/mistakes
  8. Bad branch experiences
  9. Difficult for small businesses
  10. Failing to honor their promises.

As you can see, people complain because they want to have minimally fair conditions to manage their money with transparency and security. Unfortunately, however, banks have often failed to provide such guarantees.

On average, compared to others, banked people may be more likely to discover the different decentralized finance platforms that exist right now on the market and therefore be encouraged to use them for their financial transactions despite the UX difficulties that exist nowadays.

In other words, most people who currently use traditional financial services worldwide are not happy with their banks’ financial tools, making them a vital sector that also needs DeFi services to manage their money more securely and privately.

But, what is DeFi all about? How can anyone start investing in the DeFi sector now? Keep reading to find out.

What Is Decentralized Finance (DeFi)?

Decentralized Finance (DeFi) is a blockchain-based type of finance that uses smart contracts on blockchains, the most common of which is Ethereum based on ERC20 Tokens, to supply traditional financial instruments instead of relying on central financial intermediaries such as banks. 

People can use decentralized finance platforms to lend or borrow money from others, trade cryptocurrencies, insure themselves against risks, and earn income in savings accounts.

This financial sector was born in 2009 when bitcoin was created. Then ICOs, which were one of Ethereum’s first major use cases, became popular in 2017.  

Since 2018, concepts like “liquidity mining pools” and “automated market makers” were introduced, which made many DeFi initiatives develop new tools like collateralized lending, borrowing, and yield farming, among others.

On the other hand, even though decentralized finance became popular in 2020, making Ethereum the only blockchain that supported DeFi tools, numerous cheaper and faster alternatives have emerged since then (for example, Binance Smart Chain). Nowadays, these two blockchains are the most used networks for developing DeFi initiatives.

However, people worldwide do not have access to this revolutionary technology in the numbers we’d like to. That’s why Eidoo’s non-custodial wallet is the perfect way to get onboard.

Why Eidoo Wallet Is the Best Way to Start in DeFi

Eidoo is a non-custodial multi-asset wallet that allows worldwide users to manage more than 500 ERC20 Tokens, Litecoin, and Bitcoin securely and privately, having an in-app integration with different DeFi protocols to invest in them directly like for example Compound, AVEE, Uniswap, Balancer, and Curve finance, among others.

How Decentralized Finance Paves the Way for Financial Inclusion

With the Eidoo non-custodial wallet, you can store, trade, and swap ERC20 Tokens, avoiding potential risks and unnecessary fees made by internal intermediaries.  Also, there are other in-app DeFi services like:

  1. NFT Manager: Platform inside the Eidoo wallet where you can visualize your NFT collectibles.
  2. DAO Manager: For people who hold PNT, you can manage your pNetwork DAO votes on this platform.
  3. Fast SEPA transfer: You can buy ERC20 Tokens with SEPA transfers in hours instead of days.
  4. eidooCARD: Decentralized payment service built on Layer-2 solution backed by VISA and connected to the Eidoo DeFi Wallet. This crypto card is, therefore, more cost-effective.

The non-custodial crypto ecosystem is making a wide range of financial instruments more accessible to anyone — now is the time to grab these opportunities and make the best use of them.

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