Why Barclays Africa Is Interested In Bitcoin And Blockchain

Why Barclays Africa Is Interested In Bitcoin And Blockchain

Photo: bitcoinconcept.com

From Quartz. Story by Elizabeth Gould.

African banks have been late to the fintech party, but after leaving huge swaths of the population to get their financial services from telcos — most famously Safaricom’s M-Pesa in Kenya — banks here are increasingly seeing the continent as a testing ground for new financial technologies like bitcoin and the blockchain.

Blockchain is the hot topic at shiny new fintech innovation hubs like Rand Merchant’s AlphaCode in Johannesburg, which hosted the Afrikoin conference in December and is running a fintech accelerator this year, and Barclays Rise in Cape Town, which is hosting Fintech Africa’s blockchain conference on Feb. 25.

Barclays Africa, which is 62-percent owned by U.K.-based Barclays, operates in 13 African countries. It hopes that an accelerator run by the U.S. chain TechStars and access to its customers will bring in new ways of thinking that the 300-year-old bank can’t conceive of on its own.

“Startups can build quicker, they can find ways around problems which banks can’t, they don’t have all the red tape, and they have a wider vision of the world,” says Warren Squires, head of Barclays Africa’s venture capital arm, the Seeker Fund.

One of Barclays’ first blockchain collaborations in Africa is with Consent, a startup who went through the bank’s pilot accelerator in Cape Town in late 2015.

“Barclays is trying to define what they become in the future. It’s like they’re going through a midlife crisis,” says Consent co-founder Shaun Conway, a medical doctor previously focused on m-health.

While Consent originally used blockchain to improve fidelity with individual medical records across different databases, Conway saw how Barclays could use his system to help comply with Know Your Customer (KYC) regulations in the short term, and safeguard customer identities in the long term.

After the accelerator, Consent won a year-long contract to build a proof of concept for the bank worth more than half a million dollars.

Barclays is working with several blockchain startups across the globe but sees special application in Africa. “Blockchain could be the most significant social and political innovation to impact Africa in 100 years,” says Arian Lewis, head of Barclays’ Open Innovation. A digital economy based on blockchain and bitcoin could hold African leaders to a new level of accountability. “If digital currencies become adopted in African nations, it could significantly reduce corruption from government, it could provide transparency and control to every day citizens.”

But the recent thinking that blockchain has a much wider application as a general purpose ledger beyond cryptocurrencies is up for debate. In a recent post “Beyond the Blockchain,” Marcus Swanepoel, the CEO of South Africa-born bitcoin startup BitX, argues the blockchain itself isn’t the magic ray of sunlight people are looking for.

“People think that if you put something on the blockchain all of the sudden the counterparty risk disappears,”says Swanepoel. “Take deeds or diamonds or shares. You’re effectively tokenizing something. But you still have to trust that the person who made the token for that asset actually holds that asset. The fraud happens when people load things onto the system, not within the system itself.”

Bitcoin itself, he contends, which has inherent and tradeable value, has no counterparty risk, making it especially appealing in Africa.

Read more at Quartz.