Africa has become a fertile ground for blockchain development, and major banks have begun to explore blockchain technology

According to The Africa Report , African financial systems are turning their attention to blockchain technology as a way to help reduce bank transaction costs.

This summer, Absa, one of South Africa’s largest banks, and Barclays Africa Bank South Africa joined the R3 blockchain consortium, which aims to explore and develop blockchain technology in the financial industry.

Absa Bank joins R3 blockchain consortium

At the time, more than 45 global banking giants had joined the R3 consortium, but that number has dropped recently with Goldman Sachs and Santander deciding to leave the consortium.

However, these large banks are still in contact with R3 and have been exploring this technology for some time, while African banks are relatively new to this field. However, the fact that African banks are participating in the development of blockchain shows that they recognize the potential of this technology and what it can bring to the financial industry.

According to a survey report previously conducted by IBM, which collected insights on blockchain technology from 200 banks around the world, 15% of banks said they would be able to run blockchain products as early as next year.

In addition, research by financial advisory firm Oliver Wyman found that banks and other financial institutions spend $100 billion to $150 billion annually on IT and operating expenses for capital markets, and another $100 billion on post-trading and securities services. They believe that distributed ledger systems can significantly reduce these costs.

Blockchain is set to take off in South Africa

Of course, if blockchain is going to take off somewhere, it’s most likely to be in South Africa.

In August this year, at a cybersecurity conference in Johannesburg, South Africa, the governor of the South African Reserve Bank (South Africa’s central bank) announced that although regulators have different views on cryptocurrencies, the central bank is open to digital currency and blockchain innovation.

Not only that, recently the South African Central Securities Depositories (CSDs) and the Russian National Settlement Depository (NSD) signed a letter of intent to cooperate to jointly create solutions using blockchain technology.

Kenya may also become fertile ground for blockchain development.

Earlier this year, John Karanja, founder of BitHub Africa and head of Kenya Cyberspace Ltd., a blockchain accelerator that provides consulting and incubation services, said that bitcoin and blockchain can help Africa achieve global inclusion.

According to Brett King, co-founder of US banking app Moven, African banks are testing blockchain technology because the region's small user base and asset size make it easier to test.

He said:

“African banks have the opportunity to create new structures that bring together unique opportunities and capabilities – like blockchain and mobile phones – to move money and mesh networks through mobile phones. The question is to use Africa’s unique potential to come up with something that negates Western logic or proposes some atypical development model.”

However, more testing and progress are needed before banks can use blockchain technology for financial transactions.