Africa May Leapfrog Traditional Banking

If bitcoin acceptance reaches a critical mass where necessities of food, shelter, and clothing can be bought with it, it will likely have reached a tipping point where it displaces national currencies.

In this scenario, many areas of the world would be leapfrogging banking infrastructure and traditional money wire transfers. Most notably this would describe the financial landscape in developing economies such as the nations of Africa.

 

Bitcoin Leapfrogging Banks

Leapfrogging is described as a theory of economic development, which skips inferior or obsolete technologies in order to move directly to advanced ones. Take, for example, phone coverage in African countries. Landlines and grids for household use were never fully developed because, by the time Africa came into market view, mobile phones were the new paradigm of telecommunications and hence, the entire infrastructure for household landlines was leapfrogged by cellular technology.

Similarly, Bitcoin technology could leapfrog the banking infrastructure of western economies and go directly to a new financial paradigm and serve the needs of the vast number of the unbanked in these regions. All that would be required on behalf of the citizens is a mobile device with internet connectivity.

World Unbanked Population

-- World Unbanked Population (ALBERTO CHAIA, 2010)

Worldwide, approximately 2.5 billion people do not have a formal account at a financial institution. Access to affordable financial services is linked to overcoming poverty, reducing income disparities, and increasing economic growth.

If one third of adults don’t use formal banking systems, can you imagine what a bank account stored in cyberspace will allow them? Bitcoin will benefit Africa more than any other area in the world once it is properly accessible and accepted. In doing so, it would have a considerable effect on pulling struggling African economies out of the dark and into the developed and modernized world.

“The combination of ubiquitous Internet-connected mobile devices and digital currency presents a tremendous opportunity to radically expand access to financial services on a worldwide basis.”

- Jeremy Allaire, Circle Internet Financial, 2013 US hearing on digital currencies

Mobile Payments

The potential to provide financial services worldwide is echoed by the adoption of mobile payment technologies such as M-Pesa, a mobile-phone based money transfer and microfinancing service for Safaricom and Vodacom.

M-Pesa is estimated to have a near 70% market share in regions such as Kenya and are becoming more accepted in surrounding countries.