If you use a credit card, PayPal, or use a mobile money app to sell or buy things, then you are using digital currency! There is a lot of innovation happening in the digital currency field right now and it is especially important for the global development sector. While it will be easier for more advanced financial institutions to adopt digital currency, the benefits of its adoption extends far beyond that sector.
Here is why the digital currency innovation matters to global development:
Puts power back in the hands of the people
Today, many people in developing countries rely on remittances from family members abroad. But wire transfers charge a lot in transaction fees (up to 6 – 10% for $200). Digital currency can facilitate a faster and cheaper bank transfer, removing the middlemen. You can see a difference even in domestic money transfers; In 2012, when the Afghanistan national police switched to a mobile payment service, M-Paisa, the employees thought that they had received a 30% raise. When they received their salaries in cash, 30% used to be “taken off the top” so, mobile money left no room for corruption and delivered their complete salaries.
For small businesses competing in the global market, digital currencies even the playing field between currency conversion rates, commission fees, and transfer limitations that come into play with traditional monetary systems.
Makes money safer
In the developing world, monetary transactions are usually in cash, which means money is also stored in cash. Holding your savings or spending money in cash can put you at risk for robbery risking the welfare of you and your family. Digital currency can take that worry away since you are not holding the cash physically. And with a digital currency like bitcoin, a unique digital signature protects every exchange so that there is no risk of fraud, chargebacks, or identity theft.
We have already seen the benefits of using digital currencies
Digital currencies are not necessarily new. M-Pesa, a mobile money service is a huge success in Kenya, with 83% of the population currently using the service. Bitcoins made their entry in the field recently, however, some organizations are already exploring its potential for social good. Organizations like BitGive are already launching initiatives to leverage bitcoin’s technology to benefit charitable organizations around the world. MIT’s Media lab launched the Digital Currency Initiative to bring together global experts in areas ranging from cryptography, to economics, to privacy, to distributed systems, to address key issues that digital currencies like bitcoin are poised to make on people’s lives in the next decade.
Technology has already changed how we do many things, and financial transactions are one of them. Being placed at TechChange has allowed me to see the many ways technology can benefit the global development sector, while also keeping in mind that it is a tool, and not the solution. It will be interesting to see how far digital currencies can impact global development!