How Web3 Bridges The Gap For The Underbanked #NewsUnitedStates

The global financial landscape is undergoing a fundamental transformation, driven by rapid advancements in technology. In particular, the emergence of decentralized finance (DeFi) and Web3 technologies promises to break down traditional barriers to financial services, making them more accessible to individuals and communities that have long been excluded. As of 2021, an estimated 1.4 billion people worldwide remain unbanked, meaning they have no access to formal banking institutions. Another 1 billion are underbanked, lacking sufficient access to affordable financial products. This exclusion contributes to cycles of poverty, as it limits individuals’ ability to save, borrow, or invest. However, decentralized technologies, which utilize blockchain infrastructure and smart contracts, offer a new pathway to financial inclusion, providing innovative solutions for these underserved populations.

Web3 technologies, which refer to a decentralized version of the internet built on blockchain, represent a significant departure from traditional centralized financial systems. Instead of entirely relying on intermediaries such as banks or payment processors, Web3 enables peer-to-peer transactions and automated financial services. For the underbanked, this is revolutionary. Access to digital wallets, decentralized applications (dApps), and cryptocurrencies means that people can store, transfer, and grow their wealth independently of traditional financial institutions, avoiding high fees and geographical limitations while complying to regulatory compliance requirements across jurisdictions.

Key industry players in this space are already making significant strides toward democratizing finance. Mastercard, in collaboration with MetaMask and Baanx, recently launched a crypto-to-fiat card allowing MetaMask wallet users to spend their cryptocurrency directly in fiat currency at any location accepting Mastercard. This new solution removes the need for intermediaries like exchanges or banks, making it easier for self-custodial wallet users to access funds outside the crypto space. This initiative is a step towards connecting Web2 and Web3 ecosystems, empowering underbanked individuals with instant crypto-to-fiat conversions for everyday purchases.

Another company actively driving financial inclusion through Web3 technologies is CrossFi, founded by Alexander Mamasidikov. It creates decentralized finance (DeFi) tools that aim to democratize access to financial services, empowering everyone to take control of their own financial futures. By building a bridge between traditional banking and DeFi, CrossFi offers a suite of products that allows users to seamlessly manage both fiat and cryptocurrency assets. These innovative products include the world’s first non-custodial payment card, enabling users to spend cryptocurrency directly from their Web3 wallets, without the need for a third-party custodian or exchange. For millions of people across various socioeconomic backgrounds who don’t have access to conventional banking, this on-chain payment card represents a gateway to the global economy, enabling their access to secure, transparent, and efficient financial services.

“We believe that financial inclusion is not just about offering financial services—it’s about creating accessible, secure, and user-friendly tools that anyone can use, regardless of where they are in the world,” said Alexander Mamasidikov, founder of CrossFi.

Another player in the Web3 finance space is 1inch
1inch
, known for its decentralized finance products. The 1inch Wallet and 1inch Card provide users with seamless ways to manage and spend digital assets. The 1inch Card allows for crypto-to-fiat conversion at competitive rates and supports Apple Pay and Google Pay, ensuring that users can make everyday purchases with crypto while benefiting from secure, fast transactions. With features like a physical and virtual card, it empowers individuals to bridge the gap between digital assets and traditional financial systems.

However, as with any new financial technology, regulatory frameworks need to be in place to prevent misuse. Fintech companies like CrossFi need to ensure compliance with local regulations by requiring users to pass Know Your Customer (KYC) checks before obtaining their credit cards. These companies work closely with local regulators and banking partners to maintain full compliance across all products, backed by dedicated legal teams that monitor and adhere to the legal requirements of each geography.

“Robust compliance and regulatory frameworks are essential to ensure that web3-powered DeFi innovations operate within the boundaries of the law. Without clear guidelines, we risk creating a system vulnerable to exploitation. That’s why, at CrossFi, we prioritize full compliance, leaving no loopholes in our approach. It’s crucial for us to adhere to the laws in the different regions we operate, as it ensures trust and long-term sustainability for our users,” said Mamasidikov.

Beyond payment cards, innovations like stablecoins and decentralized lending platforms are also playing a crucial role in extending financial services to the underbanked. Stablecoins, for instance, are digital currencies pegged to a stable asset such as the U.S. dollar issued by Circle or Hong Kong dollar issued by IDA. These offer a secure and reliable alternative to the volatility of other cryptocurrencies, making them an ideal option for people in regions with unstable currencies or inflationary economies. Additionally, decentralized lending platforms enable individuals to access credit without needing a traditional bank account or credit score, opening up new opportunities for financial empowerment.

Olga Feldmeier, a prominent blockchain expert and CEO of Smart Valor, an AI-powered crypto investment platform, believes that DeFi has the potential to completely reshape the financial landscape by making essential financial services more accessible to all. “Stablecoins, for example, can serve as a lifeline for people living in countries with hyperinflation, providing them with a way to protect their wealth and participate in the global economy,” Feldmeier explained.

Mamasidikov also shares a similar view: “The real power of Web3 in democratizing finance lies in its ability to provide programmable liquidity and trust-less financial instruments. By leveraging decentralized protocols, we can bypass traditional gatekeepers and offer financial services that are not bound by geographic borders or legacy banking infrastructure. In this context, stablecoins represent a breakthrough in providing stability in uncertain economic environments. They allow people to store and transfer value securely and affordably, particularly in regions where traditional banking is inaccessible or unreliable.”

The movement towards decentralized finance is still in its early stages, but it holds immense potential for creating a more inclusive financial system. By eliminating intermediaries and providing direct access to financial services, innovative Web3 technologies can empower individuals to take control of their finances, no matter where they are located. In doing so, they are helping to bridge the gap for the underbanked and pave the way for a more equitable global economy.

Ultimately, the democratization of finance through Web3 is not just about technology; it’s about creating a fairer, more inclusive system that gives everyone the opportunity to participate in the global economy. The future of finance is decentralized, and it’s one where everyone has a seat at the table.