In a significant move that signals a shift in Nigeria’s financial landscape, three of the country’s largest banks—Zenith Bank, First Bank, and United Bank of Africa—have joined other banks and fintechs on Zone, Africa’s first regulated blockchain network for payments. This development, announced on July 10, 2024, is perhaps the first time traditional financial institutions in Nigeria are displaying interest in blockchain technology.
The adoption of blockchain by these banking giants reflects a growing global trend, as financial institutions worldwide seek to harness the technology’s potential. But what drives this shift, and what does it mean for Nigeria’s financial sector? To understand this, let’s uncover what blockchain technology is and how global financial institutions are using it.
Blockchain technology, at its core, is a decentralised system for storing and transferring data with unprecedented security. Its ability to create immutable records across a distributed network has made it increasingly attractive across various industries, particularly in finance, where data security, transaction integrity, and service provider trust are paramount. Blockchain’s ability to secure data and enable trust was demonstrated and popularised with the launch of Bitcoin in 2008. The first peer-to-peer currency that can be transacted between people as easily as sending a text. Bitcoin’s transactions are stored in blocks that are created simultaneously by thousands of nodes, such that altering any data on the chain requires gaining control of all the nodes on the network and making the change, which is almost impossible.
Internationally, major financial players have already made significant strides in blockchain adoption. JP Morgan Chase, for instance, launched its own blockchain, Onyx, to facilitate transactions using its stablecoin, JPM Coin. Visa has been collaborating with Circle to test cross-border fiat currency payments on the Ethereum blockchain, while Mastercard recently introduced crypto credentials to verify acceptable tokens for wallet transactions.
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However, banks and fintechs in Nigeria are taking a different route. Rather than developing proprietary systems, they’re integrating with Zone’s regulated blockchain network to enable payments. Zone, a payment infrastructure company previously known as Appzone, has been a key player in Nigeria’s financial technology sector for 16 years, and its rich heritage and collaboration with the banks over the years is one of the reasons some institutions trust them to deliver as they promise with this technology.
Unlike some of the other blockchain use cases adopted by financial institutions globally, Zone’s blockchain solution to payments is connecting banks and fintechs directly to each other. Every bank gets its own blockchain node and real-time settlement account with access to settlement accounts of other participants, which means each bank on the Zone network effectively functions as a payment switch. This system will streamline interbank transactions, potentially reducing costs and increasing efficiency.
Addressing Nigeria’s financial challenges
The adoption of blockchain technology comes at a critical time for Nigeria’s financial sector. While digital payments have seen remarkable growth—increasing from N387 trillion in 2022 to N600 trillion in 2023—the industry faces significant challenges.
According to the Nigeria Inter-Bank Settlement System (NIBSS), over N82 billion was lost to reported fraud cases between 2023 and 2024. Moreover, Interswitch, a leading fintech company, recently reported losses of N30 billion due to chargeback fraud.
Zone’s blockchain solution purports to address these issues. “The peer-to-peer nature as well as the transparency and immutability of blockchain transactions make fraudulent chargebacks nearly impossible,” explains Obi Emetarom, CEO of Zone.
“All parties can immediately see the transaction state, significantly reducing dispute resolution times.”
Potential and Challenges
While Zone’s solution shows promise, questions remain about its scalability and long-term viability. “The real test will be whether this system can accommodate all of Nigeria’s financial institutions without compromising speed or security. Moreover, regulatory challenges persist. Although Zone has acquired a switching and processing license from the Central Bank of Nigeria (CBN), the broader regulatory framework for blockchain in finance remains uncertain.
As Nigeria’s largest banks venture into blockchain, the move signals a potential shift in the country’s financial infrastructure. If successful, this adoption could pave the way for more efficient, secure, and transparent financial services.
However, the journey is just beginning. The true impact of this blockchain adoption will only become clear as more institutions join and the system is tested at scale. It’s an exciting development, but one that requires careful monitoring and evaluation.
As Africa’s largest economy embraces this cutting-edge technology, the world will be watching to see if Nigeria can become a model for blockchain adoption in emerging markets.
Yetunde Ademola, writes from Lagos.
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