By William Mzimba, Chief Executive of Accenture South Africa and Chairman of Accenture sub-Saharan Africa.

In a significant development for the digital economy locally, SA’s largest banks swapped an asset for the first time using a blockchain network late in 2016.

The transaction, which essentially entailed a smart contract being distributed using an open source platform on a network of all the main banks as well as the central bank, was reported to be a success as well as a great platform for learning.

Collaboration is going to be crucial to the success of blockchain solutions going forward and it is very positive that a local working group, as well as recent announcements of some of our major banks joining international working groups, are being set up to co-create the optimal solution for the industry.

The smart contract solution is expected to see cryptocurrencies combined with smart contracts to lower transaction costs, speed up settlement and improve transparency. However, unlike many of the traditional solutions in this space, banks will want them linked to legal tender.

The blockchain has so many potential benefits that it simply cannot be ignored – it can cut out additional costs that may accrue in major areas like payments, syndicated loans and trade finance. It will be able to cut out the myriad layers of intermediary costs when transacting across borders, for example.

Things are certainly heating up as in the middle of 2016 Absa became the first African bank to join international partnership R3 to design and apply distributed and shared ledger-inspired technologies to financial markets. It was recently announced that Standard Bank has followed suit and also joined the network.

In November last year R3 captured the headlines when it made its Corda distributed ledger platform available on an open source platform, granting the global developer community universal access to its source code to encourage collaboration, review and contribution to the platform. Corda was built in close collaboration with over 70 banks and financial institutions.

While blockchain is an electronic ledger of payments that is shared between parties on servers and does away with the need for a central authority – it is a continually updated list of transactions across a peer to peer network – banks need a different model to be designed that works best for them. Remember that cryptography allows each participant to work with the ledger in a secure way, but banks also want to ensure there is a measure of control within a private group, as opposed to the traditional “permissionless” system like bitcoin.

Accenture has been facilitating this move by developing a system to modify a block of transactions without comprising the integrity of the blockchain. Essentially by using what is called a “Chameleon Hash” authorised administrators under an agreed governance model can use a private key to unlock the keys between the blocks without breaking the chain. There are even additional security features whereby the “edit” key can be divided into three pieces.

Expect to see innovations like this make waves in the year ahead as banks and other service providers look to digitise across their numerous business units to improve customer experiences – but also improve security. The “edit” key, for example, is designed for this very purpose as it can prevent hackers from exploiting weaknesses in the codes of blockchain-based systems.

A commercially viable working solution is not yet ready for the market. However, these recent developments indicate we are not far off. Confidence in the system will be the most important hurdle to overcome, following which regulatory approval would also need to be received.

However, we are not far from take-off. In August and September last year Accenture’s survey of more than 30 global commercial banks revealed that nine in 10 participating executives said their bank is currently exploring the use of blockchain in payments largely because of the myriad compelling benefits blockchain offers.

Most banks surveyed- mirroring the developments in SA above – are still in the early stages of adoption, with about three-quarters either involved in a proof-of-concept, formulating their blockchain strategy, or just beginning to look into it. In other words, despite their enthusiasm for and interest in blockchain, many banks are still considering where to use it.

Regardless of progress, the most prevalent use cases banks are studying involve intra-bank cross-border transfers. Cross-border remittances, corporate payments, and inter-bank cross-border transfers are a secondary focus. But wherever they hope to deploy blockchain, executives expect a wide range of benefits, including lower costs, quicker settlement, fewer errors and exceptions, and new revenue opportunities.

However, a lot hinges on the extent to which a formal network emerges to facilitate global accessing and clearing of payments. Regardless of who’s creating and driving the network, banks roundly agree that without a robust one, blockchain has little chance for success.

Another key for broader adoption is generating internal momentum for blockchain integration and implementation—something that half of the banks in our survey said they currently struggle to do.

It is clear this is one of the most exciting spaces to watch in the next few years as an optimal solution is developed. The implications for a continent like Africa will be enormous as we have the ability to leapfrog any legacy architecture that may hold broader adoption back.

Banks will, however, need to look at the bigger picture and work together—including with non-banks—to help define the backbone that can underpin a universally accepted global payment system.

This move is revolutionary in that it has the ability to transform how banks execute transactions. The first steps being taken by SA banks in this regard are very promising – especially due to the need for broader financial inclusion of so many people across our country that do not have access to financial services. Further internal momentum and education of key stakeholders is now needed for optimal solutions to be integrated into local banking ecosystems.

William Mzimba, Chief Executive of Accenture South Africa and Chairman of Accenture sub-Saharan Africa.