Blockchain technology is hacking down the forest of fees that has made remittances such a lucrative business for banks and transferring agents.
As this table from the World Bank shows, sending a relatively small amount of R1 340 from SA to Kenya costs an average of 12%. Using blockchain technology, companies like Paxful, Flutterwave, AppZone Switch and Chipper Cash are gate-crashing that party, allowing remittances for as little as 1% – and even that low cost is dropping fast as more competition enters the market.
“For years we’ve heard talk of how blockchain technology will revolutionise business, but now we are seeing the evidence,” says Sonya Kuhnel, director of Bitcoin Events.
“The big use case for blockchain in Africa is remittances, and in some countries these inflows account for 4% to 5% of GDP. So to have 12% of that swallowed in costs is massive. Here is an excellent example of the kind of disruption blockchain technology is bringing to Africa.”
The Blockchain Africa Conference 2022, a virtual conference that take place on March 17-18, features some astonishing African blockchain entrepreneurs, such as Uche Elendu, founder and CEO of AppZone Switch, which is a blockchain-based platform designed to facilitate both local and intra-African payments in fiat and digital currencies such as stablecoins.
Elendu points out that one of the biggest barriers to intra-African trade is the ability to make payments across borders, other than in fiat US dollars. AppZone Switch has solved this by creating a platform that allows for the settlement in real time of fiat currency transactions as well as digital currencies. The objective is to make intra-African payment settlement instant and secure.
To help this trend along, the Pan African Payment Ecosystem (PAPE) was created as a private, permissioned blockchain network which includes a consortium of banks and fintech players.
“There is no doubt that a huge amount of cross-border payments and remittances are going to be processed and settled on the blockchain in the coming years, and this is a very real threat for the banks that do not engage with this new technology,” says Kuhnel.
Cardano founder Charles Hoskinson will once again be the keynote speaker at the Blockchain Africa Conference, and is expected to outline plans for the streamlining and expansion of the blockchain network that was launched in 2017 as an alternative to Ethereum.
Hoskinson is credited with selling blockchain technology to the Ethiopian government, introducing decentralised digital identity (DID) for five million students across 3 500 schools as a way to store educational records. DIDs can be adapted to dozens of other use cases, and could ultimately become a place where personal information, from ID documents to Know Your Customer (KYC) details, can be stored in a central repository and accessed with the permission of the owner. No more putting together a package of personal details every time you want to apply for finance, for example.
Kuhnel highlights some of the blockchain business cases that are already being rolled out in Africa.
- Absa, PwC and BankservAfrica are partnering with Cardano Africa on a digital ID project that has massive application in Africa, allowing for ID verification which in turn will help in bringing financial services to the unbanked;
- Central Bank Digital Currencies (CBDCs) – South Africa recently announced a trial of CBDCs for cross-border payments that could motivate other financial institutions around the world to adopt the technology. In another example, Nigeria is planning on introducing a CBDC called the e-Naira in 2022.
- Supply chain and trade finance. Blockchain companies like DataLedger and BeefLedger are developing technology to drive efficiencies in the supply chain by reducing information asymmetries between transacting parties.
- The government of Egypt, through its customs authority, introduced an integrated information platform referred to as the National Single Window for Foreign Trade Facilitation in 2021. This will vastly improve trade turnaround times and provide better quality information to the government.
- Trade and Development Bank (TDB) – fertiliser trade finance transactions worth $400 million have been delivered from Morocco to Ethiopia, all using blockchain technology. The initiative aims to reduce the trade finance gap in Africa and boost trade between African countries.
- Gaming and Web3 – Jambo and Nestcoin in Nigeria and Usiku Games in Kenya allow online gamers to generate an income by earning non-fungible tokens (NFTs) at zero cost to themselves.
- Giving everyone access to the internet in Zanzibar – Mesh internet network operator World Mobile has partnered with the Zanzibar eGovernment Agency to launch free metered Wifi internet access at public-facing government institutions.
These are just some of the use cases that will be profiled at the Blockchain Africa Conference, says Kuhnel.
You can sign up for the event here.
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