Wednesday, November 24, 2021/04:40PM/ by Business & Market Unit/ Header Image Credit: Blockgeeks
Many have asked and will continue to ask questions around what the future holds in a digital economy, as we continue to witness increased digital connection among people, businesses, governments, devices, data, and processes, with the global internet of things (IoT) market projected to reach USD$1,463.19 billion by 2027.
As the digital landscape continues to evolve, businesses seek clarity and opportunities to scale and reinvent themselves to ensure they remain relevant in the ever-changing world. While some ambiguities persist, organisations like Interswitch are helping to demystify the ambiguities around critical technologies that are poised to shape the business environment especially in Africa. One of such is Blockchain technology.
On October 15, 2021, Interswitch unveiled its whitepaper on blockchain technology titled "Blockchain Technology: The Future of Africa's Digital Economy". The 12-page whitepaper (available for download here) is an effort by the leading integrated digital payment and e-commerce company to share thoughts around blockchain technology and how organisations can leverage this innovation to transform their businesses. The report shone light on the prospects it portends for the future of Africa's digital economy, the key players involved in blockchain tech, some use cases, the challenges and recommendations that will facilitate the adoption of blockchain technology.
According to a PwC research report that assessed how blockchain is currently being used across industries, Blockchain has the potential to boost global GDP by USD 1.76 trillion by 2030, with Source Verification (USD 962bn), Payments and Financial Instruments (USD 433bn), Identity (USD 224bn), Contracts and Dispute Resolution (USD 73bn) and Customer Engagements (USD 54bn) as the five key areas with the most potential.
Blockchain and the AfCFTA, Riding a Bull
With the implementation of the landmark African Continental Free Trade Area (AfCFTA) agreement, it is expected that Africa will be the largest free trade area in the world connecting 1.3 billion people across 55 countries together with a combined gross domestic product (GDP) valued at US$3.4 trillion. Paul Kukubo, Chief Executive of the Kenya ICT Board, is optimistic that blockchain and smart contracts could help administer border procedures and national single windows in a more efficient, transparent, and secure manner, and improve the accuracy of trade data.
Africa can benefit from the use of blockchain technology to facilitate cross-border transactions, this will help reduce the high cost of remittance payment, enable access to financial services, ensure privacy, create jobs, improve business environment and foster healthy competition.
Parties of the AfCFTA and interested stakeholders understand that the lifeblood of trade is payments. Therefore, cross-border trade will be difficult without an efficient and effective means to make payments. With the blockchain technology, cross-border payments will rely less on correspondent networks, standardise data and manage credit risks better, to mention a few. It is therefore no wonder that Afreximbank recently rolled out PAPSS stating that the system will serve as a continent-wide platform for the processing, clearing, and settling of intra-African trade and commerce payments leveraging a multilateral net settlement system, and its full implementation will save the continent more than US$5 billion in payment transaction costs each year.
Making Digital Count for More
Experts also agree that with blockchain, the AfCFTA proposition will be strengthened such that that while individual African countries deal with the process of digitalising their trading systems, they can also adopt a common digitised platform that would facilitate continental free trade, and these platforms can help realise the goal of increased inter-regional trade within Africa and change Africa from a resource dependent continent to an active trading partner with the world and within Africa.
Little wonder why Interswitch has recently partnered with Interstellar to jointly develop blockchain-powered infrastructure services and solutions. Akeem Lawal, Managing Director, Transaction Switching and Payment Processing (Purepay) at Interswitch explained that the partnership underscores the company's intent on driving blockchain enabled solutions on the continent. He said, "This new alliance underscores the directional evolution of our blockchain innovation strategy which is premised on our strategic intent of developing a native, proprietary enterprise-grade distributed ledger technology stack that is practically tailored to the African context. This enables us to progressively digitise multiple industry value-chains across African markets whilst also supporting the actualisation of the Pan-African Payment Ecosystem, riding the wave of opportunities created by such initiatives as the AfCFTA".
Information security experts also assert that that blockchain can enable peer-to-peer payments without an intermediary, leveraging a robust multilateral net settlement system as the Interswitch blockchain platform.
As explained in the whitepaper, blockchain is a chain of blocks that solves the problem of centralisation, hence it is said that blockchains are decentralised digital ledgers which utilise cryptographic algorithms to verify the creation and transfer of digitally represented information over a peer-to-peer network. The technology is built on the principles of decentralisation, transparency, auditability, security and privacy, which are poised to encourage quick adoption especially amongst digital natives.
The whitepaper emphasised that blockchain technology has the potential to foster innovation and broaden access to banking systems for countries and provide greater access to financial services in developing and emerging markets like the African continent. Therefore, African financial institutions need to position their business strategically to embrace this new and disruptive technology.
However, to achieve this, the whitepaper identified the following as some of the steps that need to be taken.
The Whiteness of a White Paper
Other insights shared in the whitepaper include various use cases in finance, education, insurance, health, law, governance, travel, supply chain, amongst others. The paper further noted that technical, regulatory, and institutional challenges need to be addressed to encourage the adoption and acceptance of blockchain by businesses
and individuals in Africa.
To download the whitepaper, visit https://www.interswitchgroup.com/blockchain