Life is expensive for the 42,583,651 Americans living below the poverty line. Western living standards, historically marked by access to healthcare, housing, education, etc., grow more unaffordable month to month for far too many. A third of Americans struggle to afford food and shelter, healthcare for a family of four averages $28K per year, and most Americans can’t scrape together $500 for an emergency.
The indignities are further compounded by “admission” barriers to upward mobility. Anyone living under the poverty line knows being poor incurs extra costs — more exorbitant fees, more inconvenience, more time required for even the simplest transactions.
We all know the score. The tax system is bent towards wealthier citizens, while the poor pay inflated portions of their income to sales, property, and gas taxes. Land use policies segregate the poor from suburban conveniences and exacerbate inequality.
Minimum account balance requirements exclude millions from critical financial services, including accessing credit and savings facilities. Existing infrastructure, in both developed and emerging markets, acts as downward pressure that reinforces disparities — privatized utilities make it difficult to attain basic services, faulty transportation services limit employment opportunities, and inflation is rising at the fastest pace in years. A declining economy is often scapegoated as the sole cause of increases in poverty, but exclusionary business practices, institutional systems, and punitive policies also play their part.
Low-income individuals disproportionately constitute the majority of the 27 percent of “unbanked” U.S. households — those who do not have accounts at deposit institutions and lack access to other mainstream financial services. Globally, 1.7 billion adults remain unbanked. These individuals often have no choice but to rely on high fee payday lenders, check-cashing stores, and other expensive alternatives to manage their money. Even the most basic financial transaction, such as cashing a check, can incur fees of up to 12% and leave the unbanked prioritizing fees over daily necessities.
Financial inclusion is a key factor to poverty reduction and requires more than just economic and social programs to change. One cannot create inclusivity without first addressing the inequalities that divide. Delivering accessible financial services means emphasizing new, adaptable models of a democratized financial market. To escape the trap, communities need relationships of trust and reciprocity that have a spillover effect into other areas of societal functioning.
In the world’s emerging markets, for example, financial innovation has an extremely different face than that of developed economies. Trying to mimic the surreal ecosystem of the Silicon Valley in a country that has an entirely different infrastructure is a pointless drain of both resources and time. Ingenuity must draw from what is at hand.
Some geographies skipped a few steps when it comes to technology adoption. Unlike their western counterparts, large populations in emerging economies bypassed landlines, dial-up modems, and prohibitively expensive personal computers. They ventured straight into the world of 3G, mobile phones, and apps.
Mobile technology freed users from the need to have fixed telephony, broadband, or reliable electrical service to reap the benefits of digitalization. It is also disrupting the poverty cycle by laying the groundwork for new kinds of adaptable digital payment systems.
Two-thirds of the global unbanked population own a mobile phone. When partnered with emergent decentralized blockchain technology, mobile’s massive market penetration presents a new recipe for overcoming traditional banking barriers. The age of expensive infrastructure and private intermediaries is winding down.
Blockchain provides a once-unimaginable level of accessibility for emerging markets, both for local interactions and for participating in the global economy. It offers an inexpensive, peer-to-peer, digitally trackable, and trustworthy alternative to centralized and prohibitive standards of exchange.
New Systems For New Economies
The sturdy marble pillars of brick-and-mortar banks were once symbols of trust. Their bold architectural forms projected stability and solidity. But these obdurate entities have locked billions of people out of the global economy and intensified institutional power.
New financial services models will figure greatly in addressing this inequity, as the means to break the cycle of poverty must extend beyond the power of the state. Government action globally is inextricably linked to economic incentive. In a corrupt market, there is little quantifiable motivation for the rich to help the poor. The wealthy and the impoverished have always been on different playing fields. But we are at the inflection point of a rigged game.
Mobile computing and decentralized technology are allowing emerging markets to participate in their own economies at scale, utilizing cryptography and mass participation to bypass institutions that have historically held all of the cards. For the first time in history, leaps in technology may serve everyone, not just the elite.