The financial industry and microfinancing already have an infrastructure, and that’s traditional banking. However, this system is already outdated. That is why innovative microfinancing platforms are modifying the pre-existing infrastructure and molding it to suit better for everyone – not only the people who already had the upper hand but those who never had access to traditional banking in the first place.
What’s wrong with the pre-existing infrastructure?
The traditional banking system was developed ages ago, so the most natural thing is for it to become a little outdated as time passes.
The major flaws of traditional banking are mostly related to the lack of flexibility and availability, which means that many potential users of these services do not have access to them.
All banks are part of a centralized banking system, which means that they follow the rules and restrictions placed by the Central bank of the country or union they are part of. Central banks are the rule makers – they decide what the minimum and maximum interest rates allowed are, they manage currencies and exchange rates and have the “ultimate power” over all policies and regulations regarding banks.
Physical offices and branches
One of the most significant disadvantages of traditional banks is that at one point or another, customers will be required to visit an office or a branch. It is a somewhat backward, considering the fact that more than half of the population of the world owns a mobile phone now, and the World Bank expects this number to rise to two thirds by 2020.
Unbanked and underbanked
Unfortunately, a centralized system results in a large number of underbanked and unbanked people, who cannot cover the requirements set by the central bank. This means that a large percentage of the world’s population remains without access to financial services because they cannot meet the requirements and conditions placed by the central banking institution.
How can innovation contribute to the rapid development of microfinancing worldwide?
Microfinancing is an innovation in the financial world in itself. However, a further boost of the availability of microfinancing is introduced with the boom of Blockchain technology. Thanks to Blockchain, platforms like AssetStream can successfully surpass the boundaries set by centralized banking systems and reach all those underbanked and unbanked people, who did not have access to financial help before.
Microfinancing is global and mobile
The AssetStream platform can be accessed from anywhere in the world at any given time. This means that a borrower from the ASEAN region can connect with a lender from Europe for example. No traditional bank can provide this kind of global service.
Blockchain-based platforms process agreements and transactions almost instantly – which is a hundred times less than the time traditional banks need.
Security, without the need to fill out a mountain of documentation
Blockchain is the reason why microfinancing platforms like AssetStream are secure, as it allows borrowers and lenders to use smart contracts. Smart contracts are automatic, and only the parties involved can make changes to them. That’s quite revolutionary, right?
The combination of these factors means the demand for microfinancing services rise, making it one of the most sought out financial services.
The benefits of microfinancing compared to traditional banking are undeniable. A great example of these benefits is the following situation:
Two neighbors living in Manila, with very different backgrounds, decided to start a printing business together, so each of them had to take a loan for the initial capital. Benjie, an established entrepreneur with a long credit history, managed to secure the loan in no time, by turning to his bank. Unfortunately, his neighbor Tala, who is a freelancer, has no credit history and the bank denies her credit application. She actually has a substantial monthly income, but all of her finances come in cash, so banking institutions deem her untrustworthy, as she has no credit history or bank account. She really wants to join Benjie in this new business, so her other option is a microfinancing platform like AssetStream.
A situation like this one is not an uncommon event with traditional banking systems. However, microfinancing and P2P platforms like AssetStream are an easy alternative, which builds on what traditional banks offer.
What does AssetStream have to say about pre-existing infrastructure?
For more than two decades, microfinance has developed a customer-oriented approach to help the unbanked and microentrepreneurs worldwide. AssetStream is one of the most innovative platforms out there because it builds on traditional financial services offered by banking institutions.
Disclaimer: This is a guest article. The views, opinions and positions expressed within it are those of the author alone and do not represent those of Cryptopolitan. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.