Special feature (Part five): Blockchain – Time to jump in or wait and see?

Ian Putter reveals that the blockchain swell is getting bigger, with Standard Bank and Deloitte getting involved.

Read more: Special feature (Part one): Blockchain – All hype or a game changer?
Read more: Special feature (Part two): Blockchain – From blood diamonds to digital identity
Read more: Special feature (Part three): Blockchain – Decentralisation is already here
Read more: Special feature (Part four): Blockchain – It’s a question of trust

China is the leader of the global blockchain pack, especially in the banking sector. The China Construction Bank has built a blockchain where 75 financial institutions can identify risky borrowers and compete to offer lower rates to more desirable ones. Crucially, the platform cuts out Swift.

Closer to home, the South African Reserve Bank (SARB) piloted a blockchain solution called Project Khokha in 2017. In partnership with seven commercial banks, and tokenising the ZAR, the SARB executed 70,000 transactions (and maintained privacy) in less than two hours, speeding up one business day’s transaction processing time by 75 percent. Usually, a single payment requires four transactions to complete, but since all seven banks had permissioned access to the same ledger – that contained all the records for every single transaction – they could pay one another directly. Ian notes that next-generation blockchains can do up to 100,000 transactions per second, and cost from 100th to 1,000th of a US cent per transaction; they also have built-in reporting and tracking capabilities, along with robust privacy.

Project Khokha II is in progress, and big-name players like Standard Bank are involved. Standard Bank has recently launched the Blockchain Research Institute in partnership with Don and Alex Tapscott (authors of Blockchain Revolution), and they hope to create a blockchain community across Africa to facilitate the growth of this technology.

“Standard Bank is deploying live, scalable blockchains,” says Ian Putter, head of the Blockchain Centre of Excellence at Standard Bank. “One is a payments blockchain that allows global importers to pay suppliers and utilises smart contract capabilities, where it validates and matches data and beneficiaries. More South African corporates are looking to collaborate with us, too, from healthcare to hedge funds. We can speed up payments and democratise banking services if we use distributed ledger technology in the banking sector; there are use cases across the world.”

The blockchain swell is getting bigger – Deloitte’s 2020 Global Blockchain survey revealed that 55 percent of responding organisations viewed it as a top strategic priority, an increase from 43 percent in 2018. However, many companies are still taking a wait-and-see approach and this is becoming risky. Although the technology is new and scalability is an issue, it’s evolving at a rapid pace. Distributed ledger technology could likely become a cornerstone technology across business processes, and early adopters will have an advantage.

Does your average CFO need a blockchain? It depends on whether the benefits of a decentralised, public record secured by proof-of-work outweigh its costs. There are encouraging use cases emerging, and the jury says that taking the time to understand how this technology can reimagine financial processes and instruments is critical.

“Many people don't realise how real blockchain is,” concludes Ian. “At some stage, it might be too late – a bit like when Kodak didn’t recognise the potential of digital images. By 2030, we will see a totally different picture.”

You can read the full Special Feature in the third edition of the 2021 CFO Magazine