Cryptocurrencies are set to displace roughly 25% of national currencies by 2030. While this will ultimately have numerous benefits to people all around the world, it is especially beneficial to countries in Afrika.
With the hopes of facilitating trade among Afrikan countries and providing financial services to people who otherwise would never have access to a traditional bank account, cryptocurrencies will be the biggest revolution in finance the world has ever seen. Banks will change the way they operate and with those changes will come very deep systematic changes to the way debt and credit works in the new world.
The future of financial mediation
Financial experts argue that, seeing as cryptocurrency is not a passing fad but a genuine innovation in finance, the only remaining barriers to widespread adoption are technical, fixable and likely to be overcome as the sector develops, especially as incubators all across countries such as Nigeria, Kenya and South Africa. What this means for banks and debt consolidation companies, however, is that the future of financial mediation will likely change.
The Managing Director of the International Monetary Fund for the Bank of England believes that, "In the future, we might keep minimal balances for payment services on electronic wallets. The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms with an edge in big data and artificial intelligence for automatic credit scoring."
As an expert on modern-day debt consolidation, Crediful notes that most people turn to debt consolidation tactics when the majority of their debt is from credit cards. What cryptocurrency does, in this instance, is absolutely do away with the need for consolidation and transform the function of a bank in this process.
The functions of a bank in a cryptocurrency economy
Governments wouldn’t have a monopoly on the money and banks wouldn’t be physically holding onto the cash, the entire global system of banking as well as credit and debt will essentially have to change. This is particularly helpful in economies in Afrika where there are restrictions on moving cash across borders or where public access to mainstream banking is low.
While banks have traditionally been used to store money, part of their function in the financial world has also been in relation to loans given out to customers on the basis that the debt owed by the client would be cleared in a manner agreed upon. Traditionally, the more the bank is in the position to leverage its holdings, the better it is able to function, and the power will be returned to the people. Tech-savvy users all across Afrika will be able to download crypto wallets to keep their funds safe.
These types of advancements are already being seen in places like Kenya, which is already a world leader in mobile based P2P lending.
Transforming a world run on credit
If the financial system transforms in the ways that are predicted due to cryptocurrencies, it is inevitable that the way credit and debt works will have to change as well. As the systems in place that normally monitor credit change, it will undoubtedly affect the world that is currently run on credit.
Popular platforms such as PayPal, Venmo and more, while not appearing to be operating on credit, do just that. These types of services all rely on credit terms and do not offer instant clearing, which is something that would change in an economy dominated by cryptocurrencies, because currencies such as Bitcoin removes the need for these clearing services and creates a different type of credit system.
Futuristic credit systems will work similarly to those in place today as they will allow people with excess monetary reserves to loan their assets out to others in order to gain a profit.
What to expect in the future
While various core systems of our banking and financial systems will change when cryptocurrencies take over, monetary exchange will operate in a large way the same as cash exchange. These innovations in fintech will allow payment and credit clearing technologies to catch up to the sophistication of Africa’s financial tools in order to revolutionize the way people spend, borrow and earn money. As more startups in African incubators begin to incorporate blockchain technologies into their business operations, they will continue to see how this can change the world of finance for everybody involved.
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