South African Banks Actively Investigating Blockchain Tech

Large South African companies and banks are beginning to experiment with blockchain technology as a way to streamline processes, saving time and money.

“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, Rand Merchant Investments senior investment executive, told ITWeb.

“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.”

According to Ross A. Mauri, general manager at IBM’s z Systems, all South Africa’s leading financial institutions have some proof of concept or early stage technology related to the blockchain.

Blockchain has the potential to transform the way business is done by allowing decentralization, disintermediation and greater efficiency. “Instead of requiring a central unit to verify payments and contracts, blockchain technology uses an open source ledger framework to establish agreements between parties, reducing steps and delays in validation,” Mauri said.

IBM is part of the Hyperledger Project, a collaborative effort to create a cross-industry open standard for distributed ledgers. Alongside IBM, JP Morgan, Accenture, CME Group, DTCC, and Intel, are also involved in the project.

Similarly, Lorien Gamaroff, the founder and CEO of Bankymoon, stated that most organizations in South Africa are actively investigating the potential of the technology. Bankymoon, a software company focusing on blockchain technology, helps companies integrate distributed ledgers into their businesses.

“There is not just a single category of business that can make use of the technology,” Gamaroff said. “In the same way that the Internet benefited all industries, so will blockchain.”

“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. Banks are particularly interested in incorporating blockchains to lower costs and speed up processes.”

Gamaroff believes that virtual currencies and blockchains are the “Internet of the next generation,” noting that the most important advantage is that nobody can manipulate or corrupt information in a blockchain.

He said:

“This means that data can be trusted absolutely. Digital currencies, like 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 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.”

Second wave of digital innovation

Technological innovations, particularly in the digital and mobile areas, have boosted inclusive growth in developing African markets over the past few years. The success of mobile payments solution M-Pesa, is a good example of the mobile revolution in the continent.

“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,” Wim Van Der Beek, managing partner at Goodwell Investments, 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,” Van Der Beek said.

“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.”