Don't bank on bitcoin banking the unbanked

Bitcoin evangelist Andreas Antonopoulos thinks that bitcoin can solve the unbanked problem.

If you've spent any amount of time studying the unbanked problem, you'll know that Antonopoulos's claim is wrong for all sorts of reasons. Firstly, the World Bank estimates that there are 1.7 billion people who lack a bank account or mobile money access, not 4 billion. More importantly, the main hurdle to having a bank account isn't lack of ID, as implied in Antonopoulos's tweet. It's that people don't have enough money to open an account.

According to FDIC [pdf], 49% unbanked U.S. households cite “don’t have enough money to meet minimum balance requirements” as a reason for not having an account—the most cited reason. "Personal identification, credit, or former bank account problems" is far down the list of most-cited reasons, coming in at fifth.

In the Philippines, the number of unbanked Filipino adults stood at an incredible 51.2 million in 2019, or 71% of total adult population. The topmost reason for not having an account is "not enough money" as reported by almost half (45%) of the unbanked (see below). Lack of ID documents is the third most cited reason, at 26%.

Bangko Sentral ng Pilipinas 2019 Financial Inclusion Survey [pdf]

The World Bank's 2017 Global Findex survey, which surveys more than 150,000 adults in over 140 economies, found that the most common reason (cited by two-thirds of the unbanked) for not have an account was "having too little money to use an account." Only one-fifth cited "lack of documentation and distrust in the financial system."

So let's not misconstrue the unbanked problem. As Yaya Fanusie put it last year: "People mainly lack financial services because they lack income and not the other way around. So, to effectively bank the unbanked, the key problem to solve is how to help people generate more income." Do read the rest of Fanusie's post, in which he provides level-headed critique of the ability for crypto to bank the unbanked.

Antonopolous really wants bitcoin to solve the unbanked problem. But if a household is too poor to to open a bank account, it's also too poor to buy some bitcoins. (Never mind that the last thing low-income families should be doing is gambling on wild bitcoin price changes.)

Bitcoin does solve a niche type of financial problem. Those who have been cut off from the payments system for political or legal reasons can use bitcoin as an censorship-resistant alternative payment rail. Sanctioned Cubans are using it. So do online shops that sell legal but controversial products like salvia divinorum or kratom. White supremacists cut off from PayPal rely on it for funding. And criminals use the bitcoin network, say to extract ransomware extortion payments or sell kiddie porn.

But this category of "unbanked" is small, and only partially overlaps with the 1.7 billion who are unbanked primarily because of poverty. Antonopolous does a disservice in grouping them together. He is banking on bitcoin solving a problem it's simply not fit to solve.