Factors influencing the adoption of blockchain technology by South African commercial banks

Abstract

Blockchain technology became known as the technology that powers the cryptocurrency Bitcoin. Although this was blockchain’s initial purpose, in recent years, it has proven capable of disrupting numerous industries. Innovation within the financial services industry has changed how the world and businesses operate. Many organisations, including global banking institutions, leverage blockchain technology to improve their organisations. However, blockchain adoption rates in developing countries, such as South Africa (SA), are relatively low. Motivated by the potential which blockchain technology possesses to disrupt the banking industry in a developing country, this study aims to understand the key factors of blockchain technology adoption by commercial banks in SA.

This study developed a categorisation framework to be used by Information Technology (IT) decision-makers and policymakers in banks in South Africa (SA) and other developing countries, to assist with strategy creation to accelerate blockchain adoption. The study employed an interpretivist qualitative research methodology to investigate the views of IT decision-makers and blockchain experts on the expected value and challenges hindering blockchain adoption in commercial banks of SA. Data was collected from IT decision-makers within commercial banks and blockchain experts within the South African context. Thematic analysis was used to analyse and understand the semi-structured interview responses of participants based on their backgrounds, knowledge of blockchain technology, and experience with IT adoption. The challenges and expected value for the adoption of blockchain technology by commercial banks in SA were investigated and technologically (T), organisationally (O), and environmentally (E) categorised using the TOE framework as a lens.

The study found that smart contracts, new banking services, and interbank collaboration are the expected value of blockchain adoption for SA commercial banks. It was further found that the expected value for blockchain adoption by SA commercial banks included lower costs, improved transactional speeds, provision for metaverse banking and cryptocurrency investing, streamlined know-your-customer (KYC) processes, and finally improved payment settlements. The results also found that the technological challenge of blockchain adoption for SA commercial banks is blockchain complexity. Blockchain complexity was further found to be caused by scalability and interoperability challenges. In addition to this, the study extended the TOE framework through a new challenge of trust within the interorganisational context. Trust encapsulated the issue of privacy and KYC documentation trust amongst commercial banks in SA. The categorisation framework can be used by IT decision-makers and policymakers in banks in SA and other developing countries to accelerate blockchain adoption.