Emerging markets are among the leading adopters of blockchain-based solutions. Digital applications can help solve many of the problems in emerging markets that are not as pressing in developed economies.
While developed western nations were the primary adopters of new technologies over the past 100 years, they have been somewhat slow in adopting digital technologies. On the contrary, the digital wave is moving fast in some of the world’s emerging markets.
The reason behind that is not hesitation or rejection of technological innovation in the west, but rather the fact that the value proposition of digital solutions is more visible and more attractive in emerging markets.
Demographics and market size more attractive for digital startups
Emerging markets typically have younger populations and high mobile penetration rates. Almost 90% of the world’s population under the age of 30 live in emerging and developing economies, especially in Africa and the Middle East. They are tech-savvy, have access to low-cost mobile devices and the internet and are also getting increasingly wealthy.
Thailand, for example, has one of the highest internet penetration rates in the world. According to Internet World Statistics, there are 57 million internet users in Thailand, out of a total population of 69 million. In 2017, there were about 660 million smartphone users in China, compared with only 220 million in the US. Hence, the size and accessibility of the market make it attractive for businesses that develop technological applications.
Emerging markets are leaders in cryptocurrency adoption
The use of digital currencies is one area where this trend has become visible. Currently, South Africa is the worldwide leader in crypto adoption. A study found that 10.7 percent of internet users in South Africa own cryptos, with Thailand and Indonesia following at 9.7 percent and 9.3 percent respectively. The global average currently stands at 5.5 percent.
It’s not surprising that cryptocurrencies are more popular in emerging markets than in developing countries. It’s not that users are more open to digital currencies, but their value proposition is relatively more attractive.
Firstly, there is a lack of alternative investment opportunities. Eugene Madondo, the digital marketing strategist at Coindirect, explains most users in South Africa view Bitcoin as a speculative asset, rather than a currency. Investors are leveraging crypto volatility to increase trading profits.
Secondly, there is lower trust in government authorities. Corruption and legal uncertainty are a problem. Therefore, the idea of a decentralized, anonymous currency is appealing to users for multiple reasons: to protect themselves from government intervention, but, on a more negative note, also to hide funds gained from criminal activities.
Thirdly, local currencies are less stable and reliable. That also explains the increasing interest in stablecoins.
Just recently, Coindirect has raised €1m in an investment round led by Concentric, with participation from Blockchain.com, and MakerDAO, to enable customers in emerging markets to trade cryptocurrencies using their local currency. Another example is BitPesa, a digital foreign exchange and payment platform that leverages blockchain settlement for fast, cost-effective payments to and from Africa.
Underdeveloped infrastructure creates opportunities
Infrastructure in emerging markets still lacks behind developing countries big time. While that’s a challenge, it’s also an opportunity. Instead of having to replace existing infrastructure and thus also having to deal with opposing corporate and political interests, emerging markets can build digital infrastructure from scratch.
Moreover, blockchain technology can help to solve problems in emerging markets, that are mostly non-existent in developing countries.
Startups such as Crowdforce or Moeda create blockchain-based applications to serve the underbanked populations in emerging markets. Tony’s Chocolonely has set out to make chocolate 100% slave free by increasing supply chain provenance and transparency. Statwig will use blockchain solutions to ensure the efficient delivery of vaccines in India through an enhanced supply-chain management system.
The list goes on. While blockchain technology can help to solve challenges and improve systems all over the world, the value proposition is often more attractive in emerging markets. That’s why it’s likely that many of the next-generation blockchain solutions won’t target developing economies, but emerging markets instead.