Over the past year, Africa has been widely reported as the next crypto frontier, helped by an under-developed infrastructure and a heavily fragmented digital payments ecosystem, making it a strong vector for virtual currencies and crypto-based remittance payments.
A recent report from blockchain research and analytics firm Chainalysis revealed that Africa’s cryptocurrency market grew by over 1,200% in terms of value received in the past year, with the firm estimating that African countries collectively received about $105.6 billion worth of cryptocurrency between July 2020 and June 2021.
It is no surprise, then, that one of Africa’s leading technology companies, Interswitch, has made blockchain technology a key part of its growth strategy.
According to Mitchell Elegbe, the firm’s founder and CEO, Interswitch’s foray into blockchain started several years ago. Back in 2018, the company partnered with Microsoft to develop a blockchain-powered supply chain finance solution for small and medium-sized businesses (SMBs) in its home market of Nigeria.
Related news: Microsoft, Interswitch Introduce Blockchain Trade Finance in Nigeria
“We have noticed that blockchain technology as a concept could potentially solve lots of challenges — not only in payments, but also in other adjacent industries,” Elegbe said, adding that the technology is quite solid and lends itself to different challenges “that should be disrupted.”
To further tap into the market value of the blockchain market, the pan-African digital payments and commerce firm recently partnered with Interstellar, an Africa-focused blockchain organization, to develop blockchain-powered infrastructure services and solutions across Africa.
Related news: Nigeria to Debut its eNaira Currency
And it’s not just the private sector that is looking to tap into the opportunities of emerging technologies. The Central Bank of Nigeria (CBN) recently launched a central bank digital currency (CBDC), the e-naira, to boost safe and fast transfers and cross-border payments.
Elegbe said the e-naira is a laudable objective but is not a new concept, and will only help to further accelerate what Interswitch has already been doing: “E-naira is basically digitizing the traditional naira, and that is what Interswitch and others in the payments space have been trying to do for years.”
Blockchain is not without its risks — and though beneficial, its unintended consequences are not lost on Elegbe. He said, however, that his “gut feeling” is that blockchain use in Africa has evolved to a mature stage where “we now know practically what it should do [and how it can] be useful.”
Interoperability Critical for Growth
In a September interview, Ecobank’s Head of Consumer Payments Osahon Akpata told PYMNTS that solving payments interoperability is the “one thing” that needs to change in order for the digital opportunities inherent in Africa to reach their full potential.
Read Akpata’s interview: Interoperability Key to Change in Payments
Akpata added that interoperability between the switches in the different regions — and between payment providers such as banks, FinTechs and mobile money operators — will simplify the exchange of money and trigger a “humongous” change in payments. Elegbe is of a similar view, affirming that most players know and understand how “critical” interoperability is for growth.
However, as more and more players enter the growing blockchain space and create different networks with no existing standards that allow them to interact with each other, enhancing interoperability has become a challenge.
Responding to that, Elegbe said the lack of full interoperability in certain areas should not stifle growth, given that it has been achieved in many use cases like account-to-account interoperability — particularly the transfer of mobile financial services between mobile network operators (MNOs) and banks.
“Interoperability is critical, but I don’t think we must wait to have all the standards for interoperability before we move. At the right time, those who benefit [and] see the need for it will either sit down to discuss interoperability, or a regulator of some sort will define standards for interoperability,” he added.
Leveraging the Pan-African Payment and Settlement System (PAPSS), a centralized intra-African payment and settlement infrastructure that enables instant payments across borders in local currency, is another way to achieve a stronger interoperable system.
Elegbe said the PAPSS has come at the “right time,” but will require a standard and framework across many countries to be effective. “I think that’s what PAPSS is trying to do, and we’re looking forward to the successes coming out of that particular initiative,” he noted.
Tracking Digital Footprints
Launched in 2002, the Nigeria-based tech unicorn has been at the forefront of major innovation milestones in Nigeria payments, and is one of the fastest-growing technology companies in the African region. Today, Interswitch covers more than 26 countries in Africa, providing a full suite of omnichannel payment solutions.
The company recently launched Nigeria’s first digital address verification service with its partner OkHi, aiming to strengthen know your customer (KYC) documentation using the digital footprints of individuals to verify their home and office address locations.
Given that “we carry our digital footprint around,” Elegbe said that by checking the data “two or three times,” they will be able to determine a customer’s home address, for example, if that location appears on the data set every evening. That data is then compared to the information provided by the client to confirm authenticity. Having that OkHi address provides countless opportunities, he added, giving customers access to larger wallets, faster loans and a better delivery service for goods.
“If people want to give you loans, they need to know where you are. And if people want to deliver or return goods to you, they need to know where to reach you,” he said.
NEW REPORT: TECHREG™ CHRONICLE – DECEMBER 2021
About: This report represents the inaugural edition of the TechREG™ Chronicle. The regulation of digital businesses is emerging as one of the signature issues of our times. Through this new publication, we seek to contribute to the debate and discussion over when, how, and when not to regulate digital businesses and the key technologies they use.