Standard Bank’s blockchain lead Naomi Snyman has been appointed to the prominent position of chairperson of the South African Financial Blockchain Consortium.
Snyman says blockchain has enormous potential to redefine the financial services landscape, but to do this the “network effect” must be fully harnessed.
The consortium is quickly proving itself to be a safe, trusted platform to drive change. In the past year, it has seen impressive growth from nine to 55 participants as more try to test and apply the benefits of blockchain technology to enhance efficiencies within the broader South African financial landscape.
“A lot of market players have been grappling with the best way to harness the blockchain’s powerful digital ledger capabilities. This has immense potential to create trust across the financial value chain and to generate fast, secure smart contracts in diverse areas like the wholesale payments system and insurance,” she adds.
However, solutions need to be tested and awareness improved in a collaborative, safe environment in which goals are clearly defined.
“Our role as banks, legal firms, regulators, insurance companies, among others, is to try and make sense of the true value proposition blockchain offers and the consortium is the best place to do that.”
The consortium aims to assimilate and demonstrate the transformative potential of blockchain technology for the South African financial industry.
“In a study done by Deloitte’s in 2017, they found that there were 28,000 blockchain use cases being tested, but the survival rate is about 8% after six months,” Snyman says. “This is why we need critical mass to harness the network effect of blockchain to generate outcomes that will bring about broader solutions. I expect to see even more participants come on board over the next six months as we look to drive the chain by moving beyond the application of concepts, philosophy and the hype around bitcoin to see what this technology can really do for society at large.”
The consortium is already testing use cases of different technologies including Ethereum, Chain, Hyperledger and Corda. But Snyman says it is important to create specific blockchain application criteria as “this is not just a magic button to push to solve all problems”. This is the same for artificial intelligence and robotics, which will not be silver bullets to solve industry-wide challenges if our current business and operational models do not change.
Things are moving fast and SA is standing out as a leading innovator in this space. The South African Financial Blockchain Consortium was recognised for their blockchain research efforts in the Banker Technology Projects of the Year Awards 2017.
While regulatory education and awareness grows, the industry is beginning to realise the power of the network and working together on developing optimal solutions. Some of the world’s biggest central securities depositories (CSDs) are, for instance, uniting to build their own blockchain consortium – South Africa is included among early thinkers on this with Canada, Switzerland and Chile.
”Permission-based blockchains are likely to catch on as it adds an extra control layer and only specified parties, like a bank and approved clients, can transact and validate the network. A ‘hidden gem’ within the blockchain technology is the ability to deliver smart contracts, where distributed ledgers offer high levels of support. Computer protocols could verify or enforce contracts and this would lead to a wide variety of potential uses in securities, syndicated lending, trade finance, swaps, derivatives or wherever counterparty risk arises,” says Snyman.
Creating multi-functional Blockchain networks across Africa with key industry players is another potential use that a bank like Standard Bank – which is the largest by assets across Africa – hopes to harness in light of the rapid growth in mobile payments.
“We are on track to redefine the South African financial system based on blockchain technology. This has tremendous promise to improve transaction speeds and reduce costs that will also help address financial exclusion challenges,” says Snyman.