The banking alternative
Emerging economies and even developed ones are suffering from the failures of their banking institutions. About 2 billion people are unbanked worldwide, which is nearly 30% of the world’s population. The world basically runs on trade which heavily relies on banking systems and supporting fintech. If 30% of the world is unbanked, it simply means that 30% of the world does not have access to trade with a greater section of the world’s population. Most payments are made through bank accounts especially those that involve large deliveries. Governments have also implemented policies that are meant to help improve tax collection and prevent tax avoidance plus evasion, however, these same laws segregate those who lack bank accounts as they fail to meet certain tax requirements.Some of the reason cited by the unbanked 30% as to why they still have not opened bank accounts in this digital age include
Lack of trust in the banking system
Lacked the requirement documents to open an account
Have inadequate money to handle the expenses required to maintain an account
Lack of financial institutions within their areas of operations
Generally, not having enough money
The expenses required to maintain an account is the reason explained by around 60% of the unbanked population as to why they still do not have bank accounts. Creating the money required to maintain bank accounts also requires one to have an account in order to trade effectively in the market. Banking services are also getting redundant thus more people are seeking for alternative ways to better handle the revenue they have made.
Cryptocurrency as the solution
Cryptocurrencies and their operations would have provided the best solution; however, volatility has caused its uptake to be slow. It is still, by far, the most promising solution to the banking problem that emerging and developing markets are facing. Freedium is backing crypto, however, its application of commodity backed cryptocurrency makes its platform leaps ahead of other solutions so far suggested.
Gold, oil, agricultural produce and other valuable commodities rarely fluctuate in price as cryptocurrencies do. Freedium’s approach would therefore mean that the FDC, when in use, will have a stable value that is based on commodities hosted in various warehouse facilities around the world. This approach is likely to broaden emerging economies as it would be easier for participants in those markets to access liquidity and other financial services as compared to traditional banking insitutions.
Having a fixed value allows interest rates to be easily calculated and creates confidence in investors. Furthermore, with the FDC, more people within economies would be easily receive the loans that they require to improve their business. Since FDC is commodity backed, commodities can act as a means of access to financial services. This is quite important in emerging markets as most of the small scale producers rely on their produce for sustinence.
There are a number of deterring factors as mentioned above that prevent most small scale producers from opening accounts. FDC removes the necessity of having an account as it allows trading in Freedium which basically opens up these producers to the worldwide market.
Eliminating banking hurdles
Frictional costs while trading is a key discouraging factor for small-scale producers who form a majority of the traders in emerging markets. Getting a buyer in a different country may not be such a tedious task for traders but conducting the trade itself is what discourages the growth is such sectors in emergin economies. Banks charge exorbitantly just to convert currency. Traders start losing money even before they send or receive the revenue they make. After the currency conversion costs, transaction fees are also imposed further reducing the profits that could have been made. By the time the money finally reaches the producer, it would have significantly reduced in amount thereby discouraging this form of business as producers look for other revenue generating alternatives.
Trading on Freedium greatly reduces the frictional costs and eliminates the bureaucracies that banking insitutions have imposed. Furthermore, the trading can be done on a peer to peer basis which further increases the chance of making more profit for producers as it can render intermediaries useless.