Effect of blockchain technology on payment services: a case of a South African commercial bank

Abstract

This study investigates the challenges and opportunities of adopting blockchain technology in payment services within a South African Commercial Bank, motivated by the problem that, despite blockchain’s potential, its integration into traditional banking systems faces significant obstacles. The research seeks to identify the primary barriers hindering blockchain adoption, assess its potential impact, and evaluate the advantages it can bring to payment services. Employing an interpretive qualitative approach, data was collected through semi-structured interviews with sixteen subject matter experts at tactical and operational levels, and thematic analysis was used to interpret findings. Thematic analysis revealed significant challenges, including regulatory compliance, data privacy, technology integration, resource requirements, and a shortage of in-house blockchain expertise. The research results underscore blockchain’s potential to streamline payment processes, reduce transaction costs, enhance security, and improve operational efficiency, particularly in cross-border transactions and real-time settlements. The study finds that while blockchain technology can advance payment services, challenges related to legacy systems, regulatory ambiguity, and high initial costs hinder its seamless implementation. Importantly, the study highlights the need for strategic collaborations, investment in employee upskilling, and the establishment of clearer regulatory frameworks to ensure compliance and facilitate blockchain’s full potential in the financial sector. The study’s recommendations include establishing stronger regulatory frameworks, prioritising collaborative efforts to enhance data privacy, investing in technical upskilling, and exploring sustainable integration solutions. While the findings are specific to a single bank, the study provides a strategic framework for broader banking institutions seeking to leverage blockchain technology to enhance operational efficiency, competitiveness, and customer satisfaction in a rapidly digitising financial environment. These findings have implications for financial institutions in similar regulatory environments, suggesting that a carefully structured approach to blockchain adoption could yield competitive advantages, reduced operational costs, and improved customer satisfaction. The study contributes to ongoing discussions on blockchain’s role in the digital transformation of banking, offering a strategic framework for banks aiming to integrate distributed ledger technology within existing infrastructures while navigating the complexities of regulatory compliance and technical integration.