A revolutionary technology based on block chain, a protocol-driven method of exchanging value over the internet without an intermediary is poised to provide Nigerian banks with a platform to execute higher transaction volumes, and slashing transactions costs at possibly over 50 percent.
The technology, named Stellar was created by a not-for-profit organisation, which intends to make the process of money transfers comparable to sending emails; free and fast. The expected end results are for banks transaction costs to reduce, encourage more people to transfer funds, which will spiral down to microfinance banking institutions and mobile money agents to cater for more people presently excluded from the financial system.
Stellar in a trial run, during which it claims about 6 million transactions which would have cost $150 million in transaction costs if they had been processed using traditional wire transfer, ended up costing only $0.20 in total.
A widely quoted estimate from a Santander InnoVentures report predicts that the Blockchain could save banks $15 to $20 billion per year by 2022 and this would stem from the Blockchain’s ability to enable banks to streamline processes around reconciliation—that is, the labor-intensive procedure banks go through with their customers, trading partners, and securities exchanges to verify everyone agrees on who is paid how much for what, said Oluwole Oyeniran, Associate Director, West Africa Technology Consulting Leader at Deloitte.
Oyeniran further explains that “blockchain is inevitable. It is technology that has the potential of disrupting and changing not only the financial industry but several industries in the world today.”
By eliminating middlemen and ensuring end-to-end connections, stellar is able to reduce the transaction cost of international funds transfer to near zero, making it possible for people to send and receive money safely at minimal costs.
“All the transactions are visible to people (on the network) so if a bank does a fraudulent transaction, it will be broadcast across the whole network and it will be very apparent that the bank did it because it will carry their signature or any person delegated such duties,” says Jed McCaleb, Co-founder and CTO of Stellar.org. While acknowledging that Softwares always have bugs, McCaleb tells BusinessDay that everything done on stellar is made public way, so if there is any glitch or something goes wrong, it will be possible to still see who owes who, and what is owed since everything is already made public around the network, by synchronising all connected units on the network every 2-5 seconds through a mechanism called consensus.
