African banks begin to harness blockchain’s potential

Rage Review : This summer, Absa Bank, one of the largest banks in South Africa, and R3 Blockchain Alliance started to cooperate to jointly develop technology for the financial industry. In addition, African banks want to use blockchain technology to reduce transaction costs, so they are also open to digital currencies and innovative technologies. This has kicked off the development of blockchain in Africa. However, due to the problem of African customer base and assets, many tests are needed before it can be truly put into use in the financial industry.

Translation: Nicole

According to The Africa Report, Africa’s financial system is turning its attention to blockchain technology as it seeks to help banks find ways to reduce transaction costs.

This summer, one of South Africa’s largest banks, Barclays Africa South Africa’s branch, Absa Bank, partnered with the R3 blockchain consortium to explore and develop the technology for the financial industry.

At the time, the R3 blockchain consortium included more than 45 global banking giants, but that number has since dropped after Goldman Sachs and Santander decided to leave the consortium.

However, as the main players are still in R3 and have been involved in the development of technology for some time, African banks are less aware of this field. The fact that banks have joined the blockchain consortium R3 shows that they see the potential of blockchain technology and its contribution to the financial industry.

According to a survey of 200 banks worldwide by IBM, 15% of them will be running blockchain solutions within the next year.

Financial consulting firm Oliver Wyman found that banks and other institutions invest $100 billion to $150 billion in IT and capital market operations, of which post-trading and securities service fees add $100 billion to annual expenses. It is believed that distributed ledger systems can significantly reduce these costs.

Blockchain to grow in South Africa

Of course, if blockchain is to take off in any corner of the world, the most likely place to do so is South Africa.

Despite the different opinions of regulators on digital currencies, the governor of the South African Reserve Bank announced at a cybersecurity conference in Johannesburg in August that the bank remains open to digital currencies and innovative technologies.

Not only that, recently South Africa’s Central Securities Depository (CSD) Strate and Russia’s National Settlement Depository (NSD) signed a letter of intent to establish a partnership aimed at creating solutions through the use of blockchain technology.

Kenya might be the ideal choice.

Earlier this year, John Karanja, founder of Africa BitHub, a blockchain accelerator that provides consulting and incubation services, and director of Space Kenya Networks Ltd., said that bitcoin and blockchain can enable Africa to achieve global inclusion goals.

Africa is a continent ripe for blockchain technology implementation

Brett King, co-founder of U.S. banking app Moven, said African banks are currently testing its applicability because Africa has a small customer base and small asset size.

He said:

“By launching new structures, new opportunities and capabilities can be brought in – like blockchain, mobile money transfers and mesh networks. The issue now is leveraging Africa’s unique potential, which in many ways defies Western logic or just doesn’t fit the traditional mold.”

However, despite all the enthusiasm for the technology, much testing and development remains to be done before banks can use blockchain for financial transactions.