African Banks' New Year Resolution
African banks should setup a blockchain alliance towards building structures that will enable same-day intra-Africa funds transfers that will massively reduce transaction costs, and accelerate intra-African trade. Japanese and South Korean banks are going to implement such structures next year, if a current experiment goes well. US-based Ripple is powering the experiment using its virtual currency, XRP.
Banks in Japan and South Korea begin tests Friday of blockchain technology from U.S. developer Ripple, aiming to achieve same-day international funds transfer while cutting costs by nearly 30%. … Blockchain technology eliminates the need for centralized clearing operations, relying instead on all members of a network to confirm transactions based on their own decentralized copies of that network's transaction history.
Blockchain offers African banks a rare opportunity to build systems which they can control without paying taxes to institutions like SWIFT and foreign correspondence banks. By depending lesser on SWIFT, which remains slow and expensive, we can grow intra-African trade.
If the banks do this, over time, fintech startups will work to make it easier for friends in Kenya and Nigeria, and indeed across the continent to send money across borders as though they are in the same country. Our payment friction remains very high and that needs to be cut.
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A blockchain initiative is desperately needed and I propose a virtual currency to be named Addis (after the headquarters of African Union, Addis Ababa) to anchor it. Let this be the New Year resolution for these banks as they work to build a modern banking architecture to support trade and business in Africa. They need to come together because blockchain provides an opportunity to keep everything in the continent.