An analysis of the outlook for blockchain technology in the South African banking industry

Abstract

Abstract Banking has been a part of humanity’s expansion and geographic migration for millennia, and whilst our methods of banking has evolved significantly since historic times, there are still pockets of the value chain which remain almost as archaic as the dawn of modern banking in the 14th century. The concept of keeping track of the global banks (and hence the worlds) money has been one which has required teams of people, and copious amounts of duplicative reconciliations since before the invention of the dual-entry ledger. In addition, given the need for trusted intermediaries in the global financial market, convoluted and often, expensive transaction paths have arisen. To compound matters, post the Global Financial Crisis of 2008/09, the financial sector has experienced a significant deterioration of its social capital with the public – resulting in an unprecedented percentage of the global population seeking alternatives to traditional banking practices. In this regard, blockchain technology has risen to prominence in the past two years, as the technology underpinning the cryptocurrency, Bitcoin. The cryptocurrency has promised – and to a large extent delivered, an alternative to cross-border transactions via the banks. In addition, by negating the need for a single (or group of) trusted intermediaries, the technology has been presented as a “silver-bullet” to the worlds distrust of the banks. This research, which was qualitative in nature, was conducted via semi-structured interviews with knowledgeable individuals within the South African banking sector. These included members from all four of the largest South African banks as well as other related stakeholders in the industry. The research found that research and development of blockchains (in various forms and for various functions) is prevalent in the industry, and in some cases, has been quite well supported across the industry players. The research describes the opinions and perspectives of how the South African banks intend to utilise the technology, as well as presented the constraints and threats to existing business practices. The research found that blockchain technology has gained enough momentum to move past being a “passing fad”, and that there are strong convictions amongst the banks that the technology will be one of the strongest contenders to disrupt the traditional banking value chain in many segments.