With the hype around bitcoin finally dying down, Africa’s largest bank by assets, Standard Bank is launching a series of events to explore the benefits and risks of emerging technology solutions in the world of financial services.
“If harnessed correctly, powerful technologies like blockchain can unleash new avenues for growth and revolutionise the way Africans bank,” says Naomi Snyman, Blockchain Lead at Standard Bank Group.
There is, however, a misperception that banks are scared of, or reluctant to, engage with emerging technologies.
“We need to debunk that myth as we harness emerging technologies like blockchain to drive change and improve efficiencies. More importantly, we are unlocking the power of collaboration by partnering with entrepreneurs and individuals on their future journeys,” she says.
The bank is partnering with entrepreneur in the blockchain and cryptocurrency space, Blockstarters, at the launch of the series on October 11. The first talk will unpack cryptocurrencies, their impact and how they can enable the payments landscape of the future.
Entering new markets is daunting enough, but a lack of insight , support and a diverse network can often see good ideas and products failing to get off ground zero.
“We are therefore creating a powerful learning platform that will help businesses and entrepreneurs with great ideas to navigate the complex marketplace. This includes creating market access opportunities but most importantly, building the awareness and knowledge to reduce risk and achieve success,” says Snyman.
For instance, with the “storm” over bitcoin over, it is opportune to analyse the protocol innovation which drove its success while also understanding its shortfalls.
Blockchain originated from the desire to make peer-to-peer payments without a bank and the cryptocurrency bitcoin was one of the first blockchain protocols.
“Its intent was to completely disrupt, allowing peer-to-peer transactions to take place without the need of a third party. However, it is really important to make the distinction between cryptocurrencies such as bitcoin and blockchain. The benefits that blockchain provides are much wider and more appealing than just cryptocurrencies, but that does not mean cryptocurrencies will not have a role to play. For instance, the initial coin offering frenzy may appear to be over, but we need to understand how this can enable new forms of value transfer and payment mechanisms,” says Snyman.
In a further move that will boost confidence in blockchain technology, South Africa’s central bank has taken a proactive stance on cryptocurrencies by creating a private crypto-currency unit.
“The role of regulation is often not well understood when you talk about cryptocurrencies and blockchain, but our central bank has realised it has a crucial role to play as the industry begins harnessing the benefits of a decentralised ledger. A future that may include borderless currencies and cross-border virtual money flows in Africa will need them as a key player,” says Snyman.
Thanks to its willingness to understand and take advantage of blockchain in the wholesale payments space, SA’s central bank won the inaugural ‘Best Distributed Ledger Initiative’ award from the Central Banking Publications in Singapore last month.
“While decentralisation is seen as the ultimate vision, this needs to be tempered by the fact that payments, digital identity or digitisation of assets will need central bank approval and so the ideal model will be based on multi-party collaboration,” says Snyman.
Standard Bank supports both open and permission-based blockchains. Permission-based blockchains add an extra control layer and only specified parties, such as a bank and approved clients, can transact and validate the network.
“There is potential for both of these models as while an open system will drive growth and expand the eco-system, private permission-based blockchain will play a big role as confidentiality of customer data and transactions remains paramount,” says Snyman.
Blockchain uses the highest level of encryption called cryptography and the decentralized nature of the system improves security because no single server can be hacked.
“Creating new networks and platforms are definitely the biggest benefits of this technology and it will continue changing lives of our customers in the future, from agri-insurance, on-demand products and peer-to-peer, among many others. This technology is fantastic for the African continent, will drive her growth and become increasingly relevant,” says Snyman.
Blockchain forms part of Standard Bank’s broader digitisation strategy, which goes further than just looking at payments to include trade finance, digital identity and global markets.
“It ties into our vision to drive Africa’s growth, which will increasingly come from new small businesses, cross-border trade and finding new business use cases to revolutionise business models,” she says.
The bank will base future quarterly events on customer needs and this will also determine location in what is a countrywide initiative. The bank will ask its customers to vote on the topics they feel are most relevant and base future digital events on this feedback.
“The spirit of blockchain is collaboration and we hope this series of events will spur exciting new business growth opportunities,” concludes Snyman.