How Will People Without Bank Accounts Use Facebook’s Libra Cryptocurrency?
Financial Inclusion: The Core Objective
The primary goal of the Libra cryptocurrency, “Bank the Unbankable”, lies in enhancing financial inclusion. This initiative aims to bring financial services to the approximately 4 billion unbanked individuals worldwide. Essentially, these are the people who do not have access to formal banking services, including those in remote and underserved areas.
Understanding Money Transfers and Africa
For a better understanding of how Libra can facilitate money transfers, let’s delve into the context of Africa, an area where access to financial services is often limited. Many individuals and families rely on cash transfers to support their daily lives, a practice that is particularly common in African countries. These individuals often transfer money from family members or friends living abroad, usually in the Western world. The challenge is to ensure that these individuals can receive and manage this money more efficiently.
Here’s how the process can work: Individuals living outside Africa, typically with regular incomes, can transfer cash into mobile wallets using an app. This app is Calibra. These funds can be easily managed and converted into the local currency when needed. By reducing transaction fees, a significant portion of the funds can be retained, ensuring that the recipients can purchase goods and services without financial strain.
Mobile Wallets and Digital Transactions
One of the key features of Libra is its accessibility through mobile wallets. As reported by Bloomberg, the development team is focusing on integrating Libra as a method of payment. This means that merchants and services can accept Libra as a form of payment, thereby facilitating direct and secure transfers. This can be achieved through web sites and/or mobile apps, making financial transactions more convenient for users.
Users can also manage their funds and balance through the Calibra app, providing them with a robust platform to not only transfer funds but also to keep a track of their financial transactions. This is significant because financial literacy and management are crucial, and these tools can empower individuals to take better control of their finances.
ATMs and Physical Cash
Despite the ease of digital transactions, there may be instances where individuals need to access physical cash. For this purpose, Calibra-branded ATMs can be used. These ATMs can dispense funds in local currencies, making it convenient for users to withdraw and manage their cash if needed. However, the design of the system is such that transaction fees are kept low, reducing the temptation to withdraw cash and carried in physical form.
Furthermore, the convenience of sending funds to another Calibra wallet means that many users may opt for digital transactions over physical cash. This not only ensures better security but also reduces the risk of funds being lost or stolen.
Layer of Middle Men and ATM Services
While Libra and its associated wallets offer a more efficient and lower cost solution, there will still be a need for traditional money transfer services. Many people without bank accounts may continue to use services provided by a layer of middle men who convert cash to Libra and back, or utilize ATM machines that perform the same function.
The developer documentation for Facebook’s Libra highlights the potential for integrating Libra into current payment systems. This means that businesses and individuals can easily adopt Libra as a means of payment, streamlining transactions and potentially reducing the need for traditional ATM services.
In conclusion, the Libra cryptocurrency offers a promising solution for financial inclusion, especially in regions where traditional banking services are scarce. By leveraging mobile technology and reducing transaction costs, it can significantly enhance the lives of billions of people around the world who currently lack access to formal financial services.