Why South Africa’s payment system cannot be replaced by blockchain yet

The Payments Association of South Africa (PASA) is watching developments in the cryptocurrency and blockchain space closely, CEO Walter Volker told MyBroadband.

Volker said they paid close to R2 million for an expert in the field, showing that they are taking new developments in blockchain technology extremely seriously.

“Our own view at this stage is that it’s not quite there yet as a replacement for the national payment system,” said Volker.

He said that if you compare the current landscape of payment technologies to a distributed ledger system, you will lose by switching.

This is because a blockchain-based system will not replace the whole ecosystem of law, dispute rights, and integration into businesses.

“That is a whole world you have to change,” said Volker.

Volker believes there may be some low-hanging fruit for distributed ledger systems in the realm of logistics, and in areas such as registration of home loans and cross-border letters of credit.

Reserve Bank

Volker stated that PASA is also working closely with the South African Reserve Bank, which recently concluded a proof-of-concept project called Project Khokha – a settlement platform built on Quorum, an Ethereum-based platform from ConsenSys.

Project Khokha emulated parts of the Reserve Bank’s real-time gross settlement system, known as SAMOS (the South African Multiple Option Settlement system).

While the test was a great success, it noted that the distributed ledger technology only addressed one aspect of SAMOS. Much more work would be needed before the whole system could be replaced with blockchain technology.

PASA and the SARB may not feel that blockchain technology is ready to tackle a country’s whole payments ecosystem yet, but Volker said they will make sure it can be accommodated in the future.

Currently, a project is underway to modernise South Africa’s national payment system, and Volker said the aim is to make it flexible so it will not be so costly to implement modern payments systems – such as those based on blockchains.