The financial services industry is awash with disruptive technologies and banks across the world are clamouring to embrace these in order to ensure they remain relevant and competitive. One such disruption is blockchain – a distributed ledger technology that many believe has the potential to change financial services as profoundly as the internet changed media and entertainment.
Among the local front-runners who are experimenting with blockchain on a significant scale is Absa, a member of the Barclays Africa. Today it became the first African banking group to join the global R3 blockchain consortium – a financial innovation firm that has partnered with 42 of the world’s leading banks to design and deliver advanced distributed ledger technologies to global financial markets.
On the back of this membership Absa will be hosting a collaboration with several other South African banks to develop the continent’s first distributed ledger-based banking solution. The aim of this working group will be to build blockchain-based solutions that address common financial services needs, with the resulting intellectual property being shared by all participating banks.
“We see huge potential for financial institutions in Africa to embrace disruptive technologies like blockchain, and use them to empower individuals and improve the lives of their customers. However, its true value will only be realised if we work together to co-develop and share solutions to common problems,” Andrew Baker, CIO for Corporate and Investment Banking at Barclays Africa, said in a statement.
“Blockchain is still maturing and has yet to gain the trust of financial institutions and consumers alike. But if and when it happens, widespread adoption will happen quickly. Change is currently focused on disruptive innovation but will become more mainstream as industry alliances such as R3 and regulatory acceptance grows.”
Baker adds that the Barclays Africa has been experimenting with blockchain for some time. In mid-2015 it launched an Africa-wide blockchain Supply Chain Challenge through its Rise innovation initiative.
It also co-hosted the second Blockchain and Bitcoin Africa Conference in February this year, and currently has more than ten blockchain-based experiments and research initiatives that are being piloted within the bank.
What is blockchain?
Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. It is a design pattern made famous by bitcoin, but its uses go far beyond.
With it, we can re-imagine the world’s most fundamental business interactions and open the door to invent new styles of digital interactions. It has the potential to vastly reduce the cost and complexity of cross-enterprise business processes. The distributed ledger makes it easier to create cost-efficient business networks where virtually anything of value can be tracked and traded—without requiring a central point of control.
The application of this emerging technology is showing great promise across a broad range of business applications.
For example, blockchain allows securities to be settled in minutes instead of days. It can also be used to help companies manage the flow of goods and related payments, or enable manufacturers to share production logs with OEMs and regulators to reduce product recalls.