what does it mean to be unbanked

What Is the Unbanked Population?

The unbanked population refers to individuals who do not have any bank accounts and are therefore unable to access traditional financial services such as deposits, transfers, and loans. In simple terms, these are people who rely solely on cash and cannot use banking services.

The unbanked are commonly found in rural or suburban areas, but may also include temporary workers, new immigrants, or freelancers in cities. There are multiple reasons for being unbanked: lack of official identification, high account opening thresholds, uneconomical fees, distant branch locations, or a general mistrust of the banking system. As a result, unbanked individuals face challenges in receiving payments, saving money, and making cross-border transfers.

Why Does the Unbanked Population Exist?

The reasons for being unbanked typically relate to identity verification, cost, and accessibility. First, many lack sufficient documentation or credit history required for account opening. Second, costs such as small account fees, interbank transfer charges, or minimum balance requirements make banking impractical for low-income individuals. Third, geographic and digital divides—such as remote branches, limited digital skills, or poor internet coverage—further restrict access.

Additionally, some people choose not to open accounts due to privacy concerns, distrust from past experiences, or dissatisfaction with fees. However, this does not mean they have no need for modern payment or savings solutions.

What Payment and Savings Challenges Do the Unbanked Face?

The main challenges for the unbanked revolve around receiving payments, making payments, and storing value. Wages are typically paid in cash, which is inconvenient to carry and store, and comes with higher risks of loss or theft. Payments must be made in person using cash, making it difficult to shop online or subscribe to digital services.

Cross-border remittances are even more complicated. Traditional channels require documentation, charge high fees, and process transactions slowly—delays are more likely during holidays or across time zones. Cash does not earn interest and lacks tools for diversifying risk.

For example, construction workers often need to recharge family mobile phones at convenience stores after receiving cash wages, pay rent in cash, or send money home—all with limited options and high costs.

How Are the Unbanked Connected to Web3?

The relationship between the unbanked population and Web3 centers on accessibility. Web3 refers to open networks and application ecosystems built on blockchain technology. With just a mobile phone and internet connection, anyone can create an on-chain wallet to send or receive digital assets. In this context, a “wallet” functions as a digital account number that anyone can set up for free.

Web3 is not a replacement for traditional banking; rather, it serves as an additional tool suitable for lightweight, cross-border payments that can be made anytime and anywhere—especially when traditional channels are inaccessible or too costly. It’s important to note that compliance and risk management remain crucial.

How Can the Unbanked Use Stablecoins for Payments?

Stablecoins are digital assets pegged to the value of fiat currencies (such as the US dollar) and serve as digital equivalents of cash (e.g., “electronic dollars”). Common examples include USDT and USDC. Their primary benefit is minimizing price volatility to make transactions more straightforward.

To receive payments, users can provide their wallet address (like an account number) for others to send stablecoins—often on blockchains with low fees such as TRON using USDT. To make payments, simply send stablecoins to the recipient’s address using a mobile wallet; transactions are typically completed within minutes.

For cash withdrawals, users need an on-ramp/off-ramp solution. Local peer-to-peer (P2P) markets allow people to exchange stablecoins for local currency or mobile wallet balances. Channels vary by country; it’s essential to research commonly used local methods and compliance requirements beforehand.

How Can the Unbanked Convert Cash to Crypto Using P2P on Gate?

Cash and stablecoins can be exchanged through P2P transactions, but it’s crucial to comply with local laws and prioritize transaction security.

Step 1: Prepare your mobile device and ensure a stable internet connection with basic security settings enabled. Install the official Gate app or access the official website. Activate phone lock screens and SMS/email protection.

Step 2: Register a Gate account and complete mandatory identity verification (KYC). KYC (“Know Your Customer”) is a compliance process that usually requires government-issued ID and facial recognition. If you lack proper documentation, P2P services may not be available; always follow local regulations and seek compliant alternatives if needed.

Step 3: In Gate’s “Fiat Purchase” or “P2P Trading” section, browse local merchants. Choose vendors that support your preferred payment methods—such as local bank transfers, mobile wallets, or in-person cash exchanges (availability depends on platform policies and merchant offerings).

Step 4: Communicate transaction details with the merchant before placing an order. Confirm exchange rates, fees, settlement times, and payment methods. Keep chat records and avoid bypassing the platform for communications or fund transfers to minimize dispute risks.

Step 5: Complete settlement according to platform procedures. Most platforms use an escrow mechanism to release stablecoins or fiat currency only after confirmation of receipt by the merchant. After completion, verify your wallet or account balance.

Step 6: Transfer stablecoins to your personal on-chain wallet or continue using your platform wallet as needed. If transferring on-chain, make sure to back up your mnemonic phrase and private key securely. Treat your private key like a “house key”—if lost or compromised, funds may be irrecoverable.

What Are the Risks and Compliance Requirements of Crypto for the Unbanked?

The first concern is price and exchange rate volatility. Most cryptocurrencies experience large fluctuations in value; even stablecoins carry issuer and compliance risks. Always choose mainstream stablecoins with high transparency and pay attention to official announcements.

Second is counterparty and fraud risk. P2P transactions involve person-to-person trades—avoid offline exchanges without platform escrow services and watch out for tactics such as price changes, fake transfers, or payment reversals.

Third is compliance and taxation. Regulations around crypto assets vary widely by country or region. Account registration, KYC procedures, cross-border transactions, deposits, and withdrawals may be subject to reporting requirements or limits. Always read Gate’s compliance notices and adhere strictly to local laws.

Finally, wallet security is paramount. Keep your private keys and mnemonic phrases secure with offline backups—never use screenshots or cloud storage in plain text. If your phone is lost, quickly use your mnemonic phrase on a new device to restore your wallet and transfer your assets.

What Are the Future Trends for the Unbanked?

Globally, the proportion of unbanked individuals has been declining over the past decade due to the rise of mobile payments and digital identity initiatives. The World Bank’s Findex reports show steady improvements in financial inclusion worldwide; GSMA annual reports indicate continued growth in mobile wallet accounts.

By 2025, many countries are promoting instant payment systems, electronic identities, and lower-cost cross-border channels. Meanwhile, crypto assets and stablecoins are increasingly used for small cross-border transactions—but regulatory requirements are becoming clearer, with greater emphasis on issuer transparency and reserve audits.

How Should the Unbanked Begin Using Crypto Tools?

Step 1: Identify your needs—are you receiving wages, sending remittances to family, or making everyday small payments? Your requirements will determine the type of wallet and blockchain you choose.

Step 2: Choose a wallet type. For simplicity, use a custodial wallet (where keys are managed by a platform); if you prefer full control, opt for a non-custodial wallet (where you manage your own private keys). Start with small amounts as you learn.

Step 3: Understand stablecoins and network fees. Prioritize widely used networks with low transaction costs in your region—such as USDT on TRON—and familiarize yourself with typical “gas fees” per transfer.

Step 4: Plan how you’ll deposit and withdraw funds. On Gate, check which fiat purchase or P2P channels are available locally; compare exchange rates and fees while allowing a safety margin.

Step 5: Build secure habits—enable two-factor authentication (2FA), diversify your funds across wallets/platforms instead of putting everything in one place, and update security settings regularly.

Step 6: Stay compliant by monitoring local regulatory updates and platform announcements; avoid exceeding transaction limits or violating reporting requirements.

How Should the Unbanked Approach Crypto Adoption?

Being unbanked does not mean being passively excluded from financial services. With mobile phones and internet access—and under legal compliance—the unbanked can leverage Web3 and stablecoins as supplementary tools for payments and savings. The key is to start from clear needs, select familiar networks and wallets, use compliant platforms like Gate for deposits/withdrawals, control transaction sizes and risks appropriately, and stay informed on regulatory developments and security best practices. This approach helps balance accessibility, cost efficiency, and safety.

FAQ

What Is the Biggest Challenge Faced by the Unbanked in Daily Life?

The unbanked struggle most with safely storing cash, making remote transfers, and accessing financial services. Relying exclusively on cash exposes them to theft risk and prevents them from building credit histories. Cryptocurrencies and stablecoins offer new alternatives by enabling direct value transfer and storage via mobile devices.

How Do Stablecoins Benefit the Unbanked?

Stablecoins (such as USDT or USDC) are digital assets pegged to fiat currencies like the US dollar, offering relatively stable value. The unbanked can use mobile wallets to hold stablecoins directly for cross-border remittances, daily payments, or savings—bypassing traditional banking barriers and costly currency conversion fees.

How Can Unbanked Individuals Safely Convert Cash Into Crypto Assets?

Unbanked users can utilize P2P trading platforms (such as Gate’s P2P service) to exchange cash directly for stablecoins or other cryptocurrencies. Choosing reputable counterparties, using escrow services, and verifying seller identities greatly reduce risks. It’s best to start with small transactions while learning the process.

Are There Legal Concerns With Using Cryptocurrency?

Crypto regulations differ by country; however, holding or using crypto assets is legal in most jurisdictions. The unbanked should be aware of local rules to avoid illegal usage. It’s advisable to follow local policy updates closely and keep transparent transaction records.

What Happens if I Lose My Crypto Wallet Keys?

Losing your private key or mnemonic phrase means permanent loss of access to your assets—there is no official customer support that can recover them. That’s why backing up your keys securely is crucial: write them down and store them safely instead of taking screenshots or keeping them on your phone. Once lost, assets cannot be retrieved.