Africa’s trade and cross-border transfer routes, once bustling with efficiency, is now in dire need of a fresh spark. For instance, sending money to Gambia or Kenya has become a costly affair, burdened by high exchange rates and fees. With 54 countries and a range of currencies, the continent longs for a solution, a solution which we have undoubtedly stumbled on, but are yet to maximize. This solution is summed up in one word – Blockchain.
What comes to your mind when you hear “Blockchain”?… Cryptocurrencies? Money Machine? Or Visuals of cemented blocks interlocked with chains, literally?
How about we freeze your mind for a second and open a new window that explores a different dimension of the technology receiving the world’s attention lately?
Blockchain has emerged as a disruptive force shaping global industries across the board. Although its effect is easily universal, one sector in particular that stands to benefit tremendously from this technological revolution is financial services. The decentralized nature of blockchain holds the potential to transform traditional financial systems, introducing greater transparency, security, and efficiency.
Did you know that by 2025, the global blockchain market in financial services is projected to reach a staggering $35 billion? This compelling statistic highlights the immense impact that blockchain technology is set to have on the financial industry and a great portion of it will arguably be streamlined towards finance.
Vitalik Buterin, Co-Founder of Ethereum, best articulates this:
“Blockchain technology has the potential to transform the financial industry by revolutionizing the way we transact, store and verify information. Its decentralized nature and immutable ledger offer unprecedented levels of transparency, security, and efficiency. This technology will not only streamline processes but also enable greater financial inclusion and empower individuals around the globe.”
What’s the Blockchain Hype All About?
First to the basics, blockchain, often referred to as a distributed ledger, is essentially a decentralized database that maintains a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block, forming a chain. This technology provides a secure and transparent way of recording and verifying transactions, eliminating the need for intermediaries such as banks or clearinghouses.
Easily one of the key benefits of blockchain technology, it can streamline and expedite cross-border transactions. Traditional international transfers can be time-consuming, expensive, and prone to errors. With blockchain, transactions can be executed in near real-time, reducing settlement times from days to minutes. This speed and efficiency not only benefit individuals and businesses by accelerating the movement of funds, but it also facilitates international trade and fosters economic growth.
Shaping Global Industries Across Board
At the core, blockchain technology enhances security and reduces the risk of fraud. Each transaction recorded on the blockchain is encrypted and linked to the previous transaction, creating an immutable and tamper-proof record. This level of transparency and immutability instills trust in the system, mitigating the risk of fraudulent activities and improving compliance with regulatory requirements.
The possibilities of blockchain technology are easily summed up in a recent report by Deloitte, which highlights its potential to save financial institutions billions of dollars annually by reducing infrastructure costs and operational inefficiencies, amongst others. Ultimately, This impact of cost saving on the financial industry’s bottom line is often positive.
In addition, blockchain technology fosters financial inclusion, particularly in regions with limited access to traditional banking services. According to the World Bank, approximately 1.7 billion adults worldwide do not have access to a bank account as of 2018. Conversely, Triple A, a data intelligence company estimates global crypto ownership rates at an average of 4.2%, to grow over 420 million crypto users worldwide in 2023.
As evidenced by renowned companies like Binance, Bitmama, and the more finance-linear startup, Changera, blockchain-based financial services can exponentially drive financial inclusion as they offer a viable alternative by enabling individuals to securely store and transfer value while circumventing hurdles posed by traditional bank accounts. The result is practically visible in, empowering the unbanked and under-banked population, providing access to fundamental financial services and driving economic growth, overall.
Any Blockers?
Nothing is too good to be true, especially not the blockchain technology. Frankly, the adoption of blockchain technology in financial services isn’t without its challenges. One of the main hurdles is regulatory compliance. As the technology evolves, governments and regulatory bodies globally are grappling with creating a regulatory framework that ensures consumer protection, prevents money laundering, and promotes market stability while allowing for innovation and growth. Striking the right balance is crucial to fully unleash the potential of blockchain technology.
Regulators are beginning to recognize the transformative potential of blockchain in financial services. However, they face the challenge of adapting existing regulations to this new paradigm.
As blockchain technology continues to mature and gain widespread adoption, its impact on financial services will only continue to grow. Financial institutions that embrace this technology will be at the forefront of innovation, driving operational efficiency, enhancing customer experience, and expanding their market reach.
The decentralized future envisioned by blockchain technology promises a more inclusive and equitable financial system, where individuals have greater control over their financial assets and transactions.
As we move towards a decentralized future, a collaboration between industry participants, regulators, and technology experts will be crucial in harnessing the full potential of blockchain and shaping a financial system that works for all. Ultimately, one thing is certain – blockchain is here to stay and will revolutionize financial services as we know it, sooner than we anticipate.
About Ruth Iselema
Ruth Iselema is one of the pioneers and leading female leaders in Africa’s blockchain space. She is the Chief Executive Officer of Bitmama Inc, a pan-African blockchain startup offering crypto products in payments, trading, and investments, with footprints across Africa, Europe, and the US. In 2021, she launched Changera, a cross-border payments platform helping businesses and individuals to send and receive money globally. Prior to founding Bitmama, Ruth consulted for other leading global exchanges and blockchain protocols on their product strategy and market entry into Africa, including Binance and CELO.
Fondly called the Bitmama of Africa’s blockchain space, Ruth has been recognized as one top 20 individuals shaping Africa’s blockchain space by leading media such as CryptoAssetBuyer and received other recognition from the German and Austrian Missions in Africa.
