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African Banks Start to See the Potential of Blockchain

Last Updated March 4, 2021 4:52 PM
Rebecca Campbell
Last Updated March 4, 2021 4:52 PM

The African financial system is turning its attention toward blockchain technology as it looks for ways to help reduce the cost of banking transactions, according to The Africa Report .

In the summer of this year, one of South Africa’s largest banks, Absa Bank, the South African subsidiary of Barclays Africa joined forces with the R3 Consortium to explore and develop the technology for the financial industry.

At the time, it joined over 45 global banking heavyweights. That number has since dropped after Goldman Sachs and Santander recently decided to let their memberships lapse with the working group.

However, while major players are still linked with R3 and have been involved with the technology for some time, African banks are relatively new to the arena. The fact that they are involved, though, suggests that they understand the potential of it and what it can do for the financial industry.

According to an IBM survey, which gathered insights from 200 global banks, 15 percent of those banks could be running blockchain solutions as early as next year.

Research by Oliver Wyman , a financial consulting firm, found that banks and other institutions spend as much as $100-150 billion on IT and operation expenditure in capital markets with post-trade and securities servicing fees costing an additional $100 billion each year. It is believed that a distributed ledger system could drastically cut these costs.

Blockchain to Take Off in South Africa

Of course, if blockchain is to take off anywhere it will most likely take place in South Africa.

At a cybersecurity conference in Johannesburg in August, the South African Reserve Bank’s governor announced that the bank was open to the innovation of digital currencies and blockchain technology despite the differing opinions of regulators on matters such as cryptocurrencies.

Absa bank
South African bank ABSA is member of the R3 blockchain consortium.

Not only that, but recently South Africa’s Central Securities Depositories (CSDs) Strate signed a Letter of Intent with Russia’s National Settlement Depository (NSD) to forge a partnership that will create solutions using the blockchain.

Kenya is also a likely spot too.

At the beginning of this year John Karanja, founder of BitHub Africa, a blockchain accelerator providing consultancy and incubation services, and director at Space Kenya Networks Ltd., said that bitcoin and blockchain would help to make Africa achieve global inclusiveness.

A Continent Ripe for Blockchain Implementation

According to Brett King, co-founder of US-based banking app Moven, who spoke to The Africa Report, African banks are now testing the ground because of a low customer base and small assets.

He said:

The opportunity is to produce new constructs that sort of bring together unique opportunities and competencies – things like the blockchain and mobile-money movement on the phone, and mesh networking. It’s a matter of using Africa’s unique potential right now to come up with things that defy Western ­logic in many terms or just don’t fit that classical model.

However, despite the enthusiasm for the technology more testing and development is required before banks will use blockchain technology for financial transactions.

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