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SA Reserve Bank gets behind payment innovation

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The South African Reserve Bank has thrown its weight behind local payment industry innovation and development, as the industry braces for a “time of unprecedented change”.

Speaking at the 2016 Payments Association of South Africa (PASA) International Conference, Deputy Governor of The South African Reserve Bank (SARB), Mr. Francois Groepe, said that the industry is entering a new phase in the South African payment and financial regulatory environment, in a time of significant changes to the international regulatory architecture and framework.

The SARB, who has processed payments in the region of R100 trillion in 2016 – three times the GDP of the country – announced that South Africa will have new, far-reaching and overarching, financial sector legislation by the end of 2016. “From a payment system perspective, it will include the introduction of new and more comprehensive regulations as well as expanded oversight and supervision by various regulators,” said Mr. Groepe.

The Deputy Governor declared that the national payment infrastructure is critical and systemically important given the important role it plays within our financial system and the implications of any potential failure for financial stability.

Addressing traditional Financial and Fintech industry leaders, Mr. Groepe stressed the need for cohesion in an effort to bolster an industry under attack from fraudsters. “SARB will interact with all participants in this environment to ensure that the necessary attention and priority is given. Together, we also aim to improve the levels of innovation as well as the safety and soundness of the national payment system and, going forward, also that of all systemically important financial market infrastructures.”

Payment stakeholders welcomed the boost from the country’s top regulator, echoing the need for holistic collaboration and the stimulation of innovation that keeps the customer safe, so that they can benefit from the convenience of technological advancements.

Leading payments provider, PayU, hailed the announcement, saying that the industry in SA is laden with exciting talent pushing for opportunities. Johan Dekker, Head of payments in Africa at PayU EMEA, said, “This is good news for the industry. We see growth in our European and other African markets driven primarily through innovation, facilitated by unity between the industry and regulators.”

The announcement by the SARB coincides with a number of technological innovations that are poised to affect South Africans in the coming months. These have been in operation in various stages in other markets and include biometric authentication and tokenisation.

Samsung Pay’s meteoric growth to 500 million global users in just six months shows the power of paying simply by being authenticated through your unique characteristics.

On Tuesday, PASA announced a new standardised specification to facilitate biometric authentication on payment cards. Working in partnership with Mastercard and Visa, this technology framework is designed to ensure open interoperable solutions in South Africa. The specification enables a range of biometric solutions, from fingerprint verification to palm, voice, iris, or facial biometrics.

Tokenisation – which is the process of replacing sensitive account number data with a unique string of numbers that cannot be used to make transactions – has already hit its straps as the emerging data security standard. Although, like most transformative technologies, it is widely expected to morph into further disruption as it evolves.

“Much of the focus in the industry at the moment is essentially about taking the friction out of the purchase, while keeping it secure, and achieving this as quickly as possible. However, with fast-changing technology and the inevitably more demanding customer, it is important that all checks are in place,” says Johan Dekker.

While the Fintech and Banking industry is providing many exciting opportunities, it should be balanced by efficiency, safety and financial stability considerations. 

Cautioning against over-reliance on the regulator, Mr. Groepe added, ”It is not the role of regulators to hamper innovation, but the SARB is jointly responsible for financial stability, which includes aspects such as cybersecurity, infrastructures, and a safe and efficient financial system. We therefore need to strive towards achieving a healthy balance when we respond to these developments.”

What is evident, though, is the central bank’s commitment. “Executives should no longer ignore the importance of the national payment system and its infrastructure, or the risks and threats (e.g. that of cybersecurity) in this environment. Payment systems and related matters need to be elevated from the back office to the boardroom. This has happened at the SARB and other central banks,” says Mr. Groepe.

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Money talks and electronic gaming evolves

Computer gaming has evolved dramatically in the last two years, as it follows the money, writes ARTHUR GOLDSTUCK in the second of a two-part series.

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The clue that gaming has become big business in South Africa was delivered by a non-gaming brand. When Comic Con, an American popular culture convention that has become a mecca for comics enthusiasts, was hosted in South Arica for the first time last month, it used gaming as the major drawcard. More than 45 000 people attended.

The event and its attendance was expected to be a major dampener for the annual rAge gaming expo, which took place just weeks later. Instead, rAge saw only a marginal fall in visitor numbers. No less than 34 000 people descended on the Ticketpro Dome for the chaos of cosplay, LAN gaming, virtual reality, board gaming and new video games. 

It proved not only that there was room for more than one major gaming event, but also that a massive market exists for the sector in South Africa. And with a large market, one also found numerous gaming niches that either emerged afresh or will keep going over the years. One of these, LAN (for Local Area Network) gaming, which sees hordes of players camping out at the venue for three days to play each other on elaborate computer rigs, was back as strong as ever at rAge.

MWeb provided an 8Gbps line to the expo, to connect all these gamers, and recorded 120TB in downloads and 15Tb in uploads – a total that would have used up the entire country’s bandwidth a few years ago.

“LANs are supposed to be a thing of the past, yet we buck the trend each year,” says Michael James, senior project manager and owner of rAge. “It is more of a spectacle than a simple LAN, so I can understand.”

New phenomena, often associated with the flavour of the moment, also emerge every year.

“Fortnite is a good example this year of how we evolve,” says James. “It’s a crazy huge phenomenon and nobody was servicing the demand from a tournament point of view. So rAge and Xbox created a casual LAN tournament that anyone could enter and win a prize. I think the top 10 people got something each round.”

Read on to see how esports is starting to make an impact in gaming.

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Blockchain unpacked

Blockchain is generally associated with Bitcoin and other cryptocurrencies, but these are just the tip of the iceberg, says ESET Southern Africa.

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This technology was originally conceived in 1991, when Stuart Haber and W. Scott Stornetta described their first work on a chain of cryptographically secured blocks, but only gained notoriety in 2008, when it became popular with the arrival of Bitcoin. It is currently gaining demand in other commercial applications and its annual growth is expected to reach 51% by 2022 in numerous markets, such as those of financial institutions and the Internet of Things (IoT), according to MarketWatch.

What is blockchain?

A blockchain is a unique, consensual record that is distributed over multiple network nodes. In the case of cryptocurrencies, think of it as the accounting ledger where each transaction is recorded.

A blockchain transaction is complex and can be difficult to understand if you delve into the inner details of how it works, but the basic idea is simple to follow.

Each block stores:

–           A number of valid records or transactions.
–           Information referring to that block.
–           A link to the previous block and next block through the hash of each block—a unique code that can be thought of as the block’s fingerprint.

Accordingly, each block has a specific and immovable place within the chain, since each block contains information from the hash of the previous block. The entire chain is stored in each network node that makes up the blockchain, so an exact copy of the chain is stored in all network participants.

As new records are created, they are first verified and validated by the network nodes and then added to a new block that is linked to the chain.

How is blockchain so secure?

Being a distributed technology in which each network node stores an exact copy of the chain, the availability of the information is guaranteed at all times. So if an attacker wanted to cause a denial-of-service attack, they would have to annul all network nodes since it only takes one node to be operative for the information to be available.

Besides that, since each record is consensual, and all nodes contain the same information, it is almost impossible to alter it, ensuring its integrity. If an attacker wanted to modify the information in a blockchain, they would have to modify the entire chain in at least 51% of the nodes.

In blockchain, data is distributed across all network nodes. With no central node, all participate equally, storing, and validating all information. It is a very powerful tool for transmitting and storing information in a reliable way; a decentralised model in which the information belongs to us, since we do not need a company to provide the service.

What else can blockchain be used for?

Essentially, blockchain can be used to store any type of information that must be kept intact and remain available in a secure, decentralised and cheaper way than through intermediaries. Moreover, since the information stored is encrypted, its confidentiality can be guaranteed, as only those who have the encryption key can access it.

Use of blockchain in healthcare

Health records could be consolidated and stored in blockchain, for instance. This would mean that the medical history of each patient would be safe and, at the same time, available to each doctor authorised, regardless of the health centre where the patient was treated. Even the pharmaceutical industry could use this technology to verify medicines and prevent counterfeiting.

Use of blockchain for documents

Blockchain would also be very useful for managing digital assets and documentation. Up to now, the problem with digital is that everything is easy to copy, but Blockchain allows you to record purchases, deeds, documents, or any other type of online asset without them being falsified.

Other blockchain uses

This technology could also revolutionise the Internet of Things  (IoT) market where the challenge lies in the millions of devices connected to the internet that must be managed by the supplier companies. In a few years’ time, the centralised model won’t be able to support so many devices, not to mention the fact that many of these are not secure enough. With blockchain, devices can communicate through the network directly, safely, and reliably with no need for intermediaries.

Blockchain allows you to verify, validate, track, and store all types of information, from digital certificates, democratic voting systems, logistics and messaging services, to intelligent contracts and, of course, money and financial transactions.

Without doubt, blockchain has turned the immutable and decentralized layer the internet has always dreamed about into a reality. This technology takes reliance out of the equation and replaces it with mathematical fact.

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