Nigeria’s fintech revolution is powering full steam ahead. Starting in the early 2000s, companies seeking to apply digital technology to finance came on the scene and made it possible to conduct monetary transactions without handling physical cash or being present with the other transacting party.
We are reaping the fruits of those early labours today. There are rapid international money transfers, quick loan platforms, electronic payment systems, and even savings and investment apps.
The banks, which once looked from lofty heights at the lowly fintech startups that introduced some of these innovative products, are now slowly modeling after these entities, with their own banking apps and daughter fintech establishments.
While the financial sector continues to adjust to that first stirring of the pond, there’s already another one brewing in the background. It’s called blockchain.
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Blockchain: What’s the Fuss About?
Unless you’ve been away from the planet for the past few years, you have almost certainly heard about cryptocurrencies. These so-called digital currencies have been bought and sold across the world like assets for a while now. At one time, cryptos like bitcoin and ethereum were the hottest investments you could make on the international assets markets.
These days, there’s a fair bit of doubt about the future of cryptos. Some faithful fans insist that the next great rally of digital currencies is around the corner. On the other hand, most financial analysts now think they won’t have a major role in tomorrow’s world.
But there’s a lot more promise for blockchain, the technology that underlies these cryptocurrencies. The majority opinion among people in the know is that blockchain is here to stay. And they say it’s so revolutionary that it could fundamentally change the way whole industries and economies function.
But if you’re not sure what blockchain is, here’s a little primer.
Blockchain: a Simple, Complex Technology
Blockchains are like chains of blocks. Each block in a chain contains data, typically data about transactions that have occurred between parties. When a transaction happens between two parties, it gets recorded as data in a block. As the transactions occur, they get added (as new blocks) to an existing chain.
There are a couple of interesting things about this technology:
1. Blockchains aren’t physical. They are digital, stored in every computer that takes part in the transaction. If a person conducts a transaction with a computer, they have access to the data on previous transactions on that chain.
2. However, the data on these blocks can’t be altered, at least in theory. If a transaction is done, it’s done. Even if you can see the records, you can’t alter them.
These two points have a lot of implications for whatever things the technology gets applied to as they did for cryptocurrencies.
First, it meant that transactions can’t be controlled by a single body. Everyone who’s involved in a chain of transactions can see the train if they want. In the case of bitcoin and ethereum for instance, it meant that transactions in these digital currencies could be verified and not be altered. There’s greater transparency, and the security of funds is more guaranteed.
Another consequence was that there was no need for a central monetary authority to regulate the supply of currencies. The system could regulate itself through a self-rewarding, self-vetting and self-sustaining ecosystem.
How Will Blockchain Affect Fintech in Nigeria?
Because of these characteristics, there’s already talk about the significant changes that blockchain could bring to fintech f it becomes fully implemented in that sector.
Perhaps the most obvious change that it could bring to Nigeria is connecting the unbanked to the country’s financial system. It’s something that existing payments startups say they’re trying to do. With blockchain, these people will be able to conduct transactions that can be authenticated and tracked.
It will also make transactions faster. Because these transactions are recorded in modules that are accessible in real-time, cases of information gaps in these dealings will fall sharply.
What’s more, technology will make it easier to authenticate financial records. The transaction records will both be available to all parties concerned, and unalterable. These factors should cut out the potential for fraud or theft in such a system.
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Possible Impediments to Blockchain in Nigeria
Blockchain is digital, so it requires electricity to run. Nigeria will need to overcome its problems with power generation and distribution if it’s to make the most of this technology.
Other obstacles to full adoption may include government regulation and a general reluctance by businesses to switch to newer technologies.
Blockchain is Coming
Whatever the roadblocks in the way of blockchain may be, the signs are that it will eventually become a part of our daily lives. Adoption has already begun in other industries elsewhere in the world, where daring logistics startups are pioneering blockchain-based goods-tracking systems. Banks are also beginning to use the technology to run more secure transaction and information storage.
It’s only a matter of time before financial technology in these parts begins to toss and turn again, stirred by the thrusting push of blockchain’s winds.
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