Standard Bank joins distributed ledger tech network

South African big four bank Standard Bank has set its sights on distributed ledger technology (DLT) to digitise cross-border trade transactions.

Standard Bank Group, the largest African bank by assets, has partnered with Hedera Hashgraph, an enterprise-grade distributed public ledger, and joined the Hedera Governing Council.

According to the bank, it will establish the continent’s first Hedera network node, which is set to soothe some of the sore points that have historically beset the development of cross-border trade.

A distributed ledger is a consensus of replicated, shared and synchronised digital data geographically spread across multiple sites, countries, or institutions. Unlike with a distributed database, there is no central administrator.

Standard Bank’s move comes after SA’s Intergovernmental Fintech Working Group (IFWG) Innovation Hub recently announced the launch of Project Khokha 2 to explore the policy and regulatory implications of innovation in financial markets driven by DLT.

Blockchains are a type of distributed ledger where transactions are organised into consecutive groups, or blocks, that are cryptographically secured.

Standard Bank is one of the participants in the IFWG’s Project Khokha 2, together with Absa, FirstRand, Investec, the Johannesburg Stock Exchange, Nedbank and Strate.

Last year, Standard Bank started experimenting with blockchain technology for processing motor vehicle claims.

In a statement, Standard Bank says lengthy settlement periods, information asymmetry between multiple parties involved in a transaction, which ends up creating delays in receiving approval from intermediaries, are some of the challenges that create bottlenecks in cross-border trade.

Further, it says, there is little to no visibility or transparency for all parties involved.

The bank notes Hedera’s DLT effectively allows for the sharing of information between two parties involved in a transaction and ensures information or data is credible and authentic – without the need for a trusted intermediary.

According to the bank, transactions conducted via the DLT platform are not confirmed until all data fields and conditions are met. This creates a transparent environment and allows for trades to be settled faster and more efficiently.

Standard Bank says it has been a pioneer in leveraging blockchain and distributed ledger technologies to bring speed and transparency to its large and growing customer base across Africa.

It has leveraged this technology for several use cases, including foreign exchange payments and settlement across partner banks, clients and counterparties involved in trades.

“As an organisation, we have established that blockchain technology can track and leapfrog legacy issues that prevent a seamless and transparent payment experience for the customer, which ultimately enables cost savings for all stakeholders,” comments Adrian Vermooten, Standard Bank chief innovation officer.

“It is within our vision to enable the group and our clients to connect with networks, within and outside of the Standard Bank Group. These developments form part of our strategic objective to drive digital transformation, both within the organisation and with our partners as a key tenet of delivering value for clients.”

The big four bank explains that while domestic payments are already instant, cheap and transparent, cross-border transactions are subject to several complications, such as dependency on banking networks.

It points out that many of these challenges are removed when conducting cross-border payments with digital currencies like stablecoins based on a DLT platform.

Stablecoins are designed to minimise price volatility by pegging the currency to a relative or particular “stable” asset or basket of assets.

The digital currency provides instant settlement and high liquidity and visibility, which in turn helps businesses to track the process and manage their own liquidity needs. This is critical in the current cash-crunch environment, says Standard Bank.

“As we see increasing interest in Central Bank Digital Currencies, tokenisation of assets and utilisation of stablecoins, it has become increasingly clear that digitisation of assets will impact all facets of our business, and we must strategically plan for these pieces to work seamlessly together,” says Ian Putter, head of DLT and blockchain at Standard Bank Group.

Mance Harmon, CEO and co-founder of Hedera Hashgraph, says: “We are seeing an evolution, as organisations and their business partners recognise the value of harnessing the best of private and public distributed ledgers together.

“Standard Bank has been a trailblazer in its use of DLT to further its mission of developing platforms to engage with and support communities and businesses wherever they operate, and creating more value socially, economically and environmentally for these communities.”

As part of the partnership, Standard Bank joins the Hedera Governing Council – a network of the world’s largest enterprises and organisations, including Avery Dennison, Boeing, Dentons, Deutsche Telekom, DLA Piper, eftpos, FIS (WorldPay), Google, IBM, LG Electronics, Magalu, Nomura, Swirlds, Tata Communications, University College London, Wipro and Zain Group.