For example, Africa’s digital payment infrastructure remains fragmented despite the huge investments into the industry over the years and big players working to retell its narrative. Compared to widespread smartphone adoption in developed markets, smartphone penetration in Africa is still less than 50%. While this may be down to several factors, the consequence of this for the banking industry is that the majority of adopters of digital payment services use alternative devices to perform payment transactions particularly , Point Of Sale (PoS) terminals and Automated Teller Machines (ATM), which are still plagued with dispense error issues and non-reversal of failed transactions in some situations. This level of usage can be seen from reports that In Nigeria’s first 7 months of 2022, ₦4.61 trillion was processed through PoS terminals compared to ₦3.56 trillion processed over the same period  in 2021.

Another issue is that this fragmentation of the payment ecosystem forces merchants to integrate with multiple payment service providers (PSPs) and banks to accept payments from their consumers, which is not only cumbersome but can be expensive for small enterprises. Issues with settlement and transaction fees encourage customers and businesses to default to cash.

With blockchain’s most powerful use case currently being for payments, stakeholders believe that the resulting benefits for this industry will include real-time settlement, faster transaction times and payment transparency. This article examines what has led us here and how blockchain technology can solve a long-standing problem in this industry.

Legacy Banking Systems in the Era of Fintech 

In 2021, Nigeria Interbank Settlement (NIBSS) data showed about 307,000 Point of Sale (PoS) machines in Nigeria, 30,000 Automated Teller Machines, and over 6,000 bank branches. However, most of the PoS machines (which are fast being adopted by cardholders) are inactive. Only 167,000 of the PoS terminals are active, while the majority are usually confirmed to be non-functional once they are attempted to be used. In addition, PoS terminals and ATMs (even when functional) frequently generate incomplete transactions that tie down customer funds and put customers through long and painful dispute resolution processes.. This has led many bank customers to shun PoS transactions due to these issues and regular transaction failures.

There are many reasons why banks ought to modernize their legacy banking systems but issues related to payment channels (as described above) are a good example.

Alan McIntyre, a senior managing director at Accenture and head of its global banking practice, spoke about “a wealth of uvalue to be extracted from banks’ operational systems”, but  releasing and optimizing that value “depends on the bank’s ability to use digital technologies”. He further explained that “the challenge lies in the banks’ legacy systems, which can impede a bank’s ability to improve operations and prepare for the future.”

While modern technology companies are entirely built around the ability to deliver many small changes quickly, legacy systems are usually based on older ways of working with long development and release cycles. Ultimately, it becomes challenging to leverage wider industry investment in new technology because they are hard to integrate or are incompatible with legacy systems and architecture. Newer systems can support the latest digital products, services and applications that banks seek to provide their customers. This means that banks can more easily delight their customers by shifting towards such systems especially in a world where customer expectations are very high..

Finally, it is worth banks asking themselves whether their legacy systems can survive the myriad of mounting external pressures, not only from the fintech sector, whichis driving many of the advances in agility and innovation—but also from regulators who are increasingly having high expectations about the speed, quality-of-service, and responsiveness of Banks based on assumptions that they have adopted  modern technologies as the standard. Unsurprisingly, many observers believe these outdated systems are reaching their breaking points. Whether judged from the point of view of customers, regulators or internal cost structures, it has become an urgent requirement for banks to adapt and update their technology stacks and strategies..

So, how exactly can banks begin to modernize their legacy systems?

On Technological Disruption and Efficiency In Payments: The Case For Blockchain Technology

In its study titled “Financial Services Technology 2020 and Beyond: Embracing Disruption”, PwC identified a handful of key priorities financial institutions must recognise to succeed in this increasingly digitized landscape, such as simplifying their legacy systems, updating their information technology (IT) operating models, taking their software-as-a-service (SaaS) credentials beyond the cloud, adopting robotics and artificial intelligence (AI), and preparing the architecture to connect to “anything, anywhere”. For the banking industry, solving the problem of payments and payment disputes through blockchain technology can provide a quick, cost-effective and efficient method of reducing transaction errors or failures.

In simple terms, Blockchain uses peer-to-peer communication to run a decentralized database similar to a diary or spreadsheet with multiple copies residing on multiple computer systems in different locations but connected over a network. It contains information about transactions recorded in a specific order, with each transaction generating a string of numbers and letters (digital signature) that depends on the previous transaction. A list of such transactions is referred to as a block and Computers can run complex algorithms using the digital signature to validate the information written into each  ‘block’. A series of blocks is the blockchain and Blockchain can serve a number of functions, all based on its core ability to record transactions in a way that guarantees correctness, transparency and immutability, as famously employed by Bitcoin. Blockchain platforms also utilize Smart contracts which are specialized computer programs  to automatically enforce obligations without human intervention.

In 2022 Zone was launched as the continent’s first regulated blockchain network for payment processing, facilitating local payments in fiat and digital currencies. On a deeper dive, Zone would seem to form a foundation of plans to build Africa’s first decentralised payment network, which will allow transactions to be processed directly between banks and OFIs without the involvement of any intermediary.

Zone’s blockchain network also keeps track of all transactions transparently and with permissioned access. This will help alleviate the high costs of maintaining a network of intermediaries and reduce the points of failure, which usually arise due to the number of intermediaries a transaction has to go through in legacy payment systems.


In conclusion, the integration of blockchain technology into the financial services industry has the potential to address the long-standing issues of payment disputes, fragmented digital payment infrastructure, and operational inefficiencies associated with legacy systems. By leveraging the unique capabilities of blockchain and distributed ledger technologies, banks and financial institutions can achieve real-time settlements, faster transaction times, and enhanced payment transparency, all while reducing transaction errors and failures.

The emergence of companies like Zone, Africa’s first regulated blockchain network for payment processing, exemplifies the transformative potential of blockchain technology in revolutionizing the payment landscape. By supporting decentralized payment networks, this technology enables direct transactions between banks and other financial institutions, minimizing the need for intermediaries and reducing points of failure.

As the financial sector continues to face mounting external pressures from fintech innovations and regulatory requirements, the modernization and adaptation of legacy systems become increasingly urgent. By embracing blockchain technology and prioritizing digital transformation, banks can unlock the immense value hidden within their operational systems and ultimately maximize value to users in the ever-evolving financial landscape.