The potential social impact of blockchain exponential technology on the financial services in South Africa

Abstract

The problem of inadequate access to financial services and products that suit a generally low income earning population in developing countries such as South Africa, can be viewed as a subset of the generally poor financial inclusion levels in such markets which are commonly referred to as third world. Developing worlds are generally characterised by problems with the government, high levels of corruption and issues with land ownership or distribution through land titles. Bank account penetration rates are accepted as a reasonable indicator for the usage of formal banking systems. Even though account penetration rates in South Africa are comparable to some European and Asian regions, Africa still has among the lowest bank account penetration rates when compared with the rest of the regions. The underlying notion is that the incumbent business models, used by financial institutes and banks, place the costs of attaining financial products/vehicles at a level that becomes unattainable to about fifty two percent of the South African population. Blockchain technology is an emergent new public, distributed ledger technology that has been demostrated to carry disruptive potential to the financial services industry through democratising trust; disintermedeating the numerous middle entities through which money must go through; and by also being the building block of Cryptocurrencies such as Blockchain, Ethereum, LiteCoin and Ripple amongst many others. This study makes use of in-depth semi-structured interviews, analysed through cognitive maps, to explore issues and uncover emergent themes as understood by senior practitioners in the Information Systems, Technology and Fintech spheres of knowledge. The basic groundwork is laid through the help of documented lessons derived from proof of concepts and experiments with this nascent technology. Sorting through which of the blockchain use cases make the most sense and carry commercial viability is going to take a lot of effort, but organisations and governments will eventually get there through concerted efforts among CIOs, IT practitioners, IT vendors and software developers. It is concluded that although industries in South Africa are awakened to Blockchain’s disruptive potential, the mainstream adoption of Blockchain technology is still some way off, with some failures and consolidations still anticipated.