Brave new world of finance - powered by FinTech

Real-time interbank settlements, one-click outsourced trust: finance as you knew it is undergoing a revolution.

Speakers opening the FinTech track on day one of Finance Indaba in Sandton painted a picture of unprecedented transaction and settlement speeds, new opportunities for financial services and enhanced transactional trust and security, thanks to FinTech innovation emerging both out of South Africa and globally.

Peter Munning, distributed engineer at Adhara, which was seed funded out of Consensys, highlighted the groundbreaking Project Khokha run for the South African Reserve Bank recently. Using what Peter described as ‘cool and revolutionary’ new solutions, the project proved that the normal daily volume of South African payments – around 70,000 – could be processed completely securely and with full settlement finality in only 90 minutes. The project is one of a series of tests being carried out internationally to determine how Blockchain distributed ledger technology (DLT) can support progress in the banking sector.

“Project Khokha was designed to provide a realistic test of a DLT-based wholesale payments system and determine whether confidentiality could be achieved at scale, while also accommodating multiple node types, each configured by a participating bank. It succeeded. The next wave of concept projects kicking off around the world will test whether underlying assets and collateral can be accommodated on the same ledger.”

The benefits go beyond the potential to settle inter-bank and cross border transactions in seconds – the distributed ledger technology can also be used to  position the SARB as an ‘observer’ in the ecosystem, rather than a potential single point of failure. Instead of needing three backup systems, the SARB can in effect have eight – the banks connected in the ecosystem.”

Keen delegates asked when blockchain-based interbank, cross border and retail based settlements were likely to go commercial: “The first projects are rather like the designer fashion shows in the world of fashion – they launch the concept before it goes commercial,” said Peter. “I expect to see the first live transactions before the end of next year, and probably up to five years before retail payments are using blockchain ledger systems,” Peter said.

Meanwhile, Terence Naidu, Managing Director at Envisionit E-Escrow, said outsourced trust via a digital platform could drive economic growth in South Africa. Envisionit’s E-Escrow system connects parties to a transaction in a trusted environment to reduce risk to both parties.

“Technology innovation allows us to address the trust issue, reduces risk to customers and service providers and allows for more business to be done,” he said.

William Chin of Click2Sure predicts new opportunities and unprecedented convenience for customers as FinTech innovation changes the face of the insurance sector. Click2Sure, which takes insurance self-service to multiple digital channels, expands opportunities for traditional financial sector stakeholders and even for newcomers. William notes that digital short term insurance platforms could allow retailers to offer extended warranties to be more competitive, or they could allow insurers to roll out innovative new products – for example, on-demand limited period cover for a customer for the duration of their holiday.

Digital solutions like these are enabling innovation and new value adds that offer businesses new growth opportunities, and new levels of convenience for customers, the speakers said.