Banking and technology in the developed countries and in the developing world
Most adults in the West couldn’t imagine a life without a bank account. Many people in countries such as the United States don’t even carry cash with them and are used to paying for all the purchases they make, big and small, with credit cards and debit cards. For them, having to prove their identity when opening an account feels absolutely reasonable and normal and, what’s as important, getting documents that prove identity is easy. Typically, all it takes to open a bank account in a country such as the United States is a simple process online because a bank can access the credit history online. Even if there is an issue with online verification, a quick visit to the bank typically solves the issue and the only identification document that is needed at the bank is the driver license. If the person doesn’t have a driver’s license, then he or she has a variety of options, including a birth certificate, a social security card, a passport or a combination of various document.
The salaries in the West today often go straight to bank accounts via direct deposit and people sometimes do not see cash for weeks. They pay their bills just like they pay for other products and services – with a credit or a debit card or a direct transfer from a bank account. To them, a life without a bank account is unimaginable.
In the developing world, things are very different. According to the data from the World Bank, about 2 billion people in the world do not have a bank account. In some countries, only about 5% of the transactions are cashless. All other transactions are in cash.
Getting a bank account may be complicated for a number of reasons. First, a bank may simply not have branches with a reasonable distance. Reasonable distance is not the same as driving distance, because not everyone has a car and in some countries even roads don’t exist everywhere.
Even if there is a bank, people simply may not have sufficient identification documents to open an account and getting identification document can also be very hard. Getting to a government office may involve a 5-6 hour ride by bus, the office may be open on certain days only and the waits may be long. Everything about the process of interacting with a bank is complex and inconvenient, from opening an account to depositing funds.
In addition to this, there is also an issue of trust. For most people in the West it is unimaginable that a country can have a dictator ruler for several decades who does what he wants and no Congress, Senate, an independent court system or free press, yet this is the reality in the majority of the developing countries. Dictators doing whatever they want include doing whatever they want with currencies. An extreme example of this is hyperinflation of Zimbabwe, which was a period in the history of the country that started in the late 1990s and lasted until 2009, when the government decided to abolish its currency altogether and switched to using the currencies of other countries, mainly the United States dollar.
According to estimates, the peak inflation month in the country has been November 2008, when the inflation reached close to eighty billion percent in one month. There are no hard numbers and no official statistics about what has been happening, because at a certain point during the period of hyperinflation the government of the country simply stopped publishing the numbers about inflation and the amount of money that it has been printing and adding to the circulation. The largest bill that the government of Zimbabwe has printed was a bill with a denomination of $100 trillion Zimbabwe dollars.
Practically speaking, it means that in 2008 a loaf of bread in the country cost the same amount of money as ten cars a decade ago. One billion Zimbabwe dollars became a price of a small bag of locally grown coffee beans.
Because of this, it is easy to understand why people in a country like Zimbabwe would not trust the government and would not rush to open bank accounts and deposit their money into the accounts.