South Africa's biggest banks and corporations are testing blockchain technology to cut operational costs and speed up their transactions. Banks are shifting from exploration to serious investment in b
South Africa's biggest banks and corporations are testing blockchain technology to cut operational costs and speed up their transactions. Banks are shifting from exploration to serious investment in blockchain systems. "In 2015, we saw all the big banks in South Africa starting to engage on blockchain and what we foresee for 2016 is an aggressive move to investment in blockchain applications," Dominique Collett, senior investment executive at Rand Merchant Investments, said.
"Blockchain is beginning to become more mainstream and people are recognizing that it is a massively powerful and transformative technology for the financial services industry," Collett said. "If we can move it into a regulated space, it is going to increase financial services access and efficiency, particularly for a continent like Africa."
Ross A. Mauri, general manager at IBM's z Systems, confirmed that all of South Africa's leading financial institutions have either a proof of concept or an early-stage blockchain implementation. The technology replaces the need for a central authority to verify transactions. Instead, "blockchain technology uses an open source ledger framework to establish agreements between parties, reducing steps and delays in validation," Mauri explained.
IBM partners in the Hyperledger Project, which brings together JP Morgan, Accenture, CME Group, DTCC, and Intel to set open standards for blockchains across industries.
Lorien Gamaroff, founder and CEO of Bankymoon, a software company that helps organizations deploy blockchain systems, said that South African companies across sectors are exploring the technology. "There is not just a single category of business that can make use of the technology. In the same way that the Internet benefited all industries, so will blockchain," he said.
"Almost every business and organization around the world has realized that to ignore developments in this space could put them at risk of becoming irrelevant," Gamaroff added. "Banks are particularly interested in incorporating blockchains to lower costs and speed up processes."
The key advantage of blockchain, according to Gamaroff, is that the system prevents tampering. "Data can be trusted absolutely," he said. He sees digital currencies like Bitcoin as the next major innovation. "Bitcoin can be sent to anyone in the world almost instantly and at a very low cost. Billions of dollars are spent each year in fees by people remitting money around the world. These fees can be eliminated by using Bitcoin."
Bitcoin's borderless transfers also matter for financial inclusion. "Bitcoin can serve the billions of people around the world who do not have access to banking services. Other assets can be transferred without requiring a trusted third-party to manage the transfer. This also means a reduction in time and costs," Gamaroff said.
South Africa is part of a broader wave of digital innovation sweeping Africa. Mobile payments, exemplified by M-Pesa's success on the continent, showed what new technologies could accomplish. Wim Van Der Beek, managing partner at Goodwell Investments, said the next phase runs deeper. "We are now moving into the second wave of digital innovation with regards to inclusive growth, and this wave is being driven by five key megatrends," he told Venture Africa. "The emergence of blockchain technology, big data, on-demand services, cloud computing and the Internet of things (IoT) are all spurring inclusive growth on the African continent. And it is the convergence of these exciting technology innovations that is changing the face of Africa," he added. "Applications for the blockchain, for example in health care or land registries, extend far beyond Bitcoin and other cryptocurrencies. In our view, it might have the same kind of transformational impact as the introduction of the Internet browser," Van Der Beek said.
