[kristofferR]

The FDIC estimates that 7.7% of the US adult population is unbanked, and 20% is underbanked [1]. Being un(der)banked is often very costly, it's one of the worst ways where being poor is very expensive [2].

On a global scale the issue is even worse, there are billions of people without access to proper banking services. I can't even begin to imagine how much time/energy/value/productivity is wasted globally due to that. Bitcoin, or another similar solution, may be the key to helping to bring those billions out of their economic exclusion and into a more prosperous reality [3][4].

[1] https://www.economicinclusion.gov/surveys/2013household/ (2013 National Survey of Unbanked and Underbanked)

[2] https://www.youtube.com/watch?v=YAxL4TB6pmQ (Spent: Looking For Change (Documentary))

[3] https://www.youtube.com/watch?v=6NfNwjJfrOg (What Bitcoin Means For Unbanked Economies)

[4] https://www.cryptocoinsnews.com/cell-phone-connected-unbanke... (The Cell Phone Connected the Unbanked, Bitcoin Will Bank Them)

[_nedR]

Ha. I am a 25-year old Indian founder of a startup in a semi-ramen phase. I have no credit-card - Its hard to get a credit card in India without a consistent income (and you need to show your previous year's tax receipts to prove it). No CC means no access to Amazon AWS or any of its international services. Indian debit cards are useless because the Reserve Bank of India has made it compulsory for all banks to use 3-D secure to authenticate debit card transactions online. So no Google Play, iTunes, Paypal, Steam, Alibaba or pretty much every other international website.

The losses from this would easily be in the tens of millions and possibly in the hundreds of millions. We are lucky (Our company account has a credit card) but this is the biggest roadblock facing every young hacker/freeelancer/startup founder, especially those starting at the college level- You can't even open a Google play developer account. On the other side, there are millions of Indians who are blocked at the last mile while trying to purchase apps, ebooks, music on the Play store or iTunes (Microsoft Store seems to work but i cannot confirm this) with no explanation given other than a cryptic "Transaction rejected by bank" . If you are an app developer wondering why so few purchases come from India - this is the biggest reason why.

It is quite baffling why the likes of Google or Apple can't get off their butts and implement 3d secure (which is becoming widespread everywhere but the U.S.). People are begging Google and Apple to take their money and being rudely turned away.

[kristofferR]

Thanks, that was a great example of how the current financial system is only beneficial for the most developed countries. The fact that you actually have it pretty easy compared to the majority of the world, despite the big problems with your situation, says a lot about how bad the current system is.

Credit/debit cards work in a fundamentally flawed way from a security perspective, you essentially give everyone your "money password" each time you pay for something and have to trust them to not abuse it. Because of that a large number of expensive middlemen, checks and barriers are needed inside the system to ensure that the trust is not abused.

One of the easiest and most obvious ways to prevent abuse of a system is to limit access to that system to only trusted actors. And one of the quickest ways of identifying trusted actors is unfortunately discrimination based on things like prosperity and nationality. That's one of the reasons why so many people are prevented from using bank cards, letting them access the system is considered too high of a risk. I guess that's why the Reserve Bank of India require 3-D Secure for debit cards - as a way to mitigate some risk of abuse.

The reason why so many stores don't implement 3-D Secure is actually pretty logical. The extra step in the order process 3-D Secure adds results in a decrease of completed transactions of up to 30%. The only reason why 3D Secure was created in the first place is because the system it was built on top of is so damn insecure.

Bitcoin will help solve this issue, since it removes the need for trust completely. When paying for something with Bitcoin you don't have that fear that the person/company you send money to will grab more money from your card than you allowed, and he/she/they doesn't have to fear that you won't pay.

Because of this Bitcoin may end up creating a much freer financial world open to anyone, no matter their nationality or prosperity.

[striking]

From the Wikipedia article: "One disadvantage for merchants is that they have to purchase MPI to connect to the Visa or MasterCard Directory Server. This is expensive (setup fee, monthly fee and per-transaction fee)" and "Supporting 3-D Secure is complicated and, at times, creates transaction failures. Perhaps the biggest disadvantage for merchants is that many users view the additional authentication step as a nuisance or obstacle, which results in a substantial increase in transaction abandonment and lost revenue."

[_nedR]

We are talking about Google and Apple here. They should be able to afford it. They don't have to enforce 3-D secure on everybody.. they only have to deploy it on Debit cards from India. Also they don't have to implement it themselves. Many smaller merchants use 3rd party payment gateways.

>>results in a substantial increase in transaction abandonment and lost revenue.

Right now 100% of all debit card transactions in India are abandoned due to lack of 3-D Secure. Almost all Indians who have a bank account have a debit card. A very small minority have acccess to Credit cards.

I think the biggest reason for merchants like Google and Apple to avoid 3-D secure is that they cannot pull money from your account without your permission. Each individual transaction has to be authenticated.

[pionar]

Ok, I'm not sure how bitcoin will "solve" anything related to this issue.

The issue is not the currency, the issue is the bank. Who will start the bank and accept the risky customers? Just because the currency changes does not change the causes of being underbanked.

[celticninja]

with bitcoin you are your own bank, you dont need a bank to give you an account. You create your own and people can send you money and you can send them money at very low cost. sure you dont get traditional services such as overdrafts, or bank charges but for the underbanked this is part of the problem not the solution.

A user in the Phillipines can create a wallet for nothing. Their relative in the US can send them bitcoin, then they exchange it for cash in the phillipines. they dont need a bank just a local trader who will trade bitcoin for cash, this will become more widespread as adoption grows so finding someone to trade with will be easier.

[celticninja]

I cant reply to hnnewguy so i will post it here.

What services does a bank provide? it holds your money, it sends your money, it allows people to send you money. all of these can be achieved by bitcoin.

Outside of these functions everything else is a finacial service; loans, overdrafts, mortgages etc. all of which attract fees and charges, these are products you are being sold, this is not banking.

hnnewguy says that banks accept risk, well the risk they accept is not you, not if you are the one depositing money with them. you are taking the risk by letting them hold your money. they do assume risk but that is when you are taking out a loan or an overdraft, bitcoin does not replace these fucntions. bitcoin replaces, holding, sending and receving money, it does this far cheaper than a bank does, especially for the poor who are hit unfairly with charges that are very high in comparison to their income.

[hnnewguy]

>it holds your money, it sends your money, it allows people to send you money

It also provides an audit trail for where money comes from and where it's going, and assumes some of the responsibility as an intermediary during those transactions. Believe it or not, that's vitally important to businesses.

Banking isn't about making payments. It's financial intermediation, and will not be usurped by Bitcoin. If anything, it will merely adopt Bitcoin into its practices.

>especially for the poor

Maybe I'm dense, but how exactly are the poor paying for things with Bitcoin?

[celticninja]

The Blockchain provides an audit trail that is considerably more transparent and easy to access than the audit trail a bank uses.

I agree, bitcoin is not out to replace banking but it can offer banking facilities to those who cannot get them and banks will adopt bitcoin for the benefit it provides them, in all likelihood bitcoin will underpin financial transactions without the end user knowing particularly with regard to international transfers.

It is not about paying for things with botcoin, for the poor most banks won't touch then because they are not financilly viable, ie their income is to low for the bank to safely lend them money (loans, overdrafts, credit cards) as a result they don't even get to access the basic hold, send, receive money services.

Think of international remittance, a worker wants to send money home, he wants to send $50, Western union charge 10% of that, a bank would probably charge 20% to send it to Philippines. This second option requires the person in the Philippines to have a bank account, which is not always the case. The first option cones at significant expense for the sender.

[hnnewguy]

>The Blockchain provides an audit trail that is considerably more transparent and easy to access than the audit trail a bank uses.

If I send money to someone unintentionally or undeservedly, how does the block-chain rectify that charge?

My bank simply reverses it. That's powerful.

>This second option requires the person in the Philippines to have a bank account

True, but Bitcoin requires a cell phone or consistent internet access, doesn't it? And there's no recourse to having your money stolen or lost? I'm not sure those are appealing scenarios to the poor, either.

Transaction fees aren't high "just because". Otherwise anyone could open a lending facility of some sort and kill it. I mean, it's not like Western Union is making excessive profits. There's a matrix of risk involved with the movement of money. Bitcoin solves some, and creates others.

[celticninja]

Perhaps you are being dense I am not sure. I said

The poor pay more for banking services than the better off do. This means they pay a higher percentage of their income for bank fees. I did not say they were buying things with bitcoin. Just that bitcoin allows them to transact far more cheaply than traditional banks do.

[hnnewguy]

>with bitcoin you are your own bank

A bank isn't a vault to store money, it's a service provider. They provide services for money, including the assumption of risk. Whether those services justify the fees charged is another story. But you certainly aren't "banking" with bitcoin any more than putting cash in your wallet is "banking".

[DaFranker]

celticninja replied to you here: https://news.ycombinator.com/item?id=8734653