One stand out omission from the RSA’s new pamphlet, ‘From the digital divide to inclusive innovation, the case of digital money‘, launched at the RSA on the 26th June 2013, was any real consideration of developments in the field of digital currencies, and their potential impact on low income countries. It’s therefore timely that we’ve just had the opportunity to ask Bitcoin, one of the more talked about players in this new space, for their perspective. Bitcoin representative, Trace Mayer, discusses the benefits that Bitcoin might bring to developing nations and the future for the digital currency:
Bitcoin’s main purpose is to send money across long distances, directly from one person to another, removing the middleman and greatly reducing costs in time, money and privacy. We believe that eventually, Bitcoin will be adopted by populations en masse. Some may even skip entire generations of currency, going directly from only using cash, to using Bitcoin, missing out credit and debit cards altogether. In doing so they will also avoid the problems associated with card payments. Credit and debit cards are outdated; they were created before the internet whereas Bitcoins have been designed with ecommerce in mind so they are much easier to use.
For people in developing nations who have never had easy access to banks and other financial services, Bitcoin opens up whole new markets and opportunities. As well as having access to a safe place to store capital, consumers will be able to buy items from abroad without having to worry about exchange rates, fees and all the other problems associated with purchasing products in a foreign currency.
Aside from the consumer benefits that I’ve already mentioned, there is huge potential for entrepreneurs in developing nations to build businesses around Bitcoin by helping to develop its on-the-ground infrastructure. For example, one of the main uses for digital currency is to send funds from one country to another, perhaps from an individual worker, to his or her family abroad. This requires infrastructure at both ends of the transaction. The Bitcoins that are sent home will need to be exchanged into local currency using special bank accounts or applications. In areas where these are harder to access there is an opportunity for entrepreneurs to set up facilities, perhaps a kiosk or other service, to enable people to convert their Bitcoins.
Interestingly, the countries that have the highest use of Bitcoin so far aren’t necessarily the richest. Such countries include Macedonia and Mongolia, which has a user base four times as high as the United States, and Ukraine, where programmers, for example, are often paid for services in the digital currency. This is arguably because Bitcoin provides a solution to difficulties which are less common in the ‘developed world’. In 2011 for example, due to disputes with the Reserve Bank of India, Paypal restricted the maximum possible transaction value for its Indian users to US$500, increasing this to US$3,000 later in the year. Anyone providing online services with a value greater than this can instead be paid virtually using Bitcoin.
Mobile payment schemes are another popular method of exchanging capital, particularly in poorer countries. MPesa is currently the most developed mobile money transfer system in the world and it is a good example of how the technology has been adopted to make financial systems in developing nations more efficient. It has demonstrated its weakness, however, in a number of server failures, preventing users that rely on its services, from sending or receiving payments.
Bitcoins can also be sent or received on mobile phones, running on top of services such as Coinapult which allows users to manage them by SMS text message. It can therefore provide the same service as MPesa but without the risk of server failure, plus it’s cheaper, faster to use and more private.
As financial institutions, banking and payments systems change to fit in with the growing developments brought about by the rise of the internet, it is inevitable that digital currencies such as Bitcoin will play an increasingly important role in our day to day lives. But those that stand to benefit most are those in developing nations. Bitcoin will provide a secure way to store money, the ability to buy and sell products and services abroad opening up whole new markets, along with countless other opportunities for both consumers and entrepreneurs. Most importantly however, Bitcoin gives us the freedom to exchange capital with whomever we want, wherever we want, and that in itself is extremely powerful and currently denies to the majority of the world’s rural poor.
Guest post by Trace Mayer, Bitcoin.
What do you think?
Do you think Bitcoin (or other digital currencies) has the potential to transform the lives of the world’s poorest communities by becoming the natural means of exchange in developing countries, where so many people have mobile phones but so few have bank accounts? Or is it just hype?
We would love to know your thoughts and comments.