E-Tranzact, the pioneer of fintech services like Unstructured Supplementary Service Data (USSD) and mobile money in Nigeria, said on Tuesday it is working with a foreign consortium on a blockchain switching platform which it hopes to launch very soon.
When launched, the platform could potentially bring drastic transformation to the country’s digital payment space as well as mark a watershed in the use of blockchain technology beyond cryptocurrencies.
Blockchain is the underlying technology of the digital currency bitcoin. In the simplest terms, it refers to a time-stamped series of immutable record of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (e.i data) are secured and bound to each other using cryptographic principles known as chains. The blockchain has no central authority, hence it is the definition of a democratized system.
Read More : Why Nigeria needs a regulatory framework for blockchain technology
Since it is a shared and immutable ledger, the information in it is open for anyone and everyone to see. In essence, anything that is built on the blockchain is by its very nature transparent and everyone involved is accountable for their actions.
Until recently, the world of financial services have only associated blockchain mostly with cryptocurrencies, the chief and first of which is bitcoin. In Nigeria, the cryptocurrency market has been so dominant that authorities have had to express concern at the rate of adoption and potential risks it could portend for financial services. On different occasions, therefore, the Central Bank of Nigeria (CBN) has issued warnings to customers, harping on the inherent risk of the cryptocurrency market especially its susceptibility to high volatility and internet criminals.
But constant engagement with stakeholders in blockchain technology has tempered the CBN’S stand, thereby giving more latitude for operators in financial services to study the new market for more opportunities.
While E-tranzact’s imminent foray into blockchain technology may not be the first time a Nigerian company in financial services is exploiting the segment, it could be the most ambitious so far, going by the bullish disposition of the company’s leaders.
“We want to be the switching service of choice for every organisation in Nigeria,” said Niyi Toluwalope, CEO of the company at a briefing on Tuesday. For a company that said it processed over N30 trillion in online payments, enabled over 2 million mobile money transactions, with an expanding network of 15,000 agents and has onboarded all the banks in Nigeria on its platform, there is every reason to be optimistic that it could achieve the target.
Moreover, in late last year E-tranzact secured N7 billion from investors. Much of that investment will go into improving its payment technology and human capital development.
E-tranzact’s ambition also aligns with a growing grasp by companies in the financial services that blockchain technology – while it may seem too complicated from the outside – is relatively easy to build, meaning that they can construct a shared distributed ledger themselves thereby doing away with the role of a trusted third party and potentially crashing the cost of transaction charges.
Though a blockchain may carry an infrastructure cost, it does not have transaction cost. It is a simple yet ingenious way of passing information from one entity to another in a fully automated and safe manner. To break down further, one party to a transaction initiates the process by creating a block. This block is verified by thousands, perhaps millions of computers distributed around the net. The verified block is added to a chain, which is stored across the net, creating not just a unique record, but a unique record with a unique history. Falsifying a single record would mean falsifying the entire chain in millions of instances. That is virtually impossible.
A switching platform would enable E-tranzact to facilitate communication between various providers in a more efficient manner. For instance when you buy things from an online store that requires payment before delivery, you pay on an app or the web before the goods are shipped. For making that payment the credit card company takes a cut for processing the transaction. With a blockchain switching platform, not only can store save on credit card,it can move the entire buying process to the blockchain. This reduces the number of people in the transaction to just the store and you, the customer.
Additionally, it can improve cross- border payments by offering added security, higher transfer speed, and lower conversion fees.
It is likely that E-tranzact would decide on a closed, permissioned system – one that would exist within a regulated market with an identifiable regulator who would determine which players would be allowed to operate within that community. This could foreclose the prospect of it creating its own virtual coin someday.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
