Obi Emetorom, Zonal Manager discusses payment decentralization through blockchain technology

Obi Emetarom, a co-founder and CEO of Zone, was one of the speakers at Thetaray’s Fintech event in Lagos last week. TechEconomy and some of the major players in Nigeria’s payments and finance sector were present.

The gathering focused specifically on how AML, risk and compliance officers, executives and managers in banks and fintechs can use AI to increase efficiency and effectiveness in their companies.

Obi spoke at the event on “Innovation, Regulations and Trust: The Cornerstones of Financial Inclusion and Economic Growth in Nigeria.”

According to Obi, innovation is the key to expanding access to financial services, but it must be balanced with effective regulations to protect consumers and promote a stable financial system.

“Trust is also crucial, as customers need to have confidence in the safety and reliability of digital financial services in order to adopt them.”

However, in an exclusive interview with TechEconomy, Obi discussed, among other things, how Zone uses blockchain technology to solve payment problems, the ban on cryptocurrency regulation and the national blockchain policy.

Decentralization of the payment network

In 2022, the firm, which Obi leads as CEO, changed from App zone to zone and since then has achieved tremendous feats, connecting various financial service providers and expanding its decentralized payment network.

The Central Bank of Nigeria (CBN) issued zonal approval to operate under the Switching and Processing license category. The switch license allows Zone to directly engage and collaborate with key payment system stakeholders such as the Nigeria Central Switch which hosts NIBSS and the various card payment schemes.

As the first decentralized payment network licensed by the Central Bank of Nigeria (CBN), Zone’s Layer-1 blockchain network enables peer-to-peer transactions without the need for an intermediary, increasing transaction speed, consistency and reliability

“Banks can exchange assets directly without the involvement of a central authority; it means that transactions can go directly between participants, making it more reliable and transparent.”

Fix the issue of failed transactions

Basically, blockchain is immutable, its protocols are open and collaborative, and this will make “digital financial services likewise more diverse, inventive and transparent,” Obi said.

In general, blockchain technology offers significant potential for Nigerian fintech firms to deliver breakthrough financial solutions and solve the country’s payment problems.

One of the most common problems commonly experienced by Nigerians is a failed financial transaction that causes customers to be debited, then reversal becomes the problem. Usually, the first step should be to call the bank’s 24/7 customer service.

After noting your problem and recording your transaction reference number, the manager will register your complaint and provide you with a tracking number for the complaint. The matter is then investigated.

“Blockchain technology solves all these problems; it tells you exactly where the money is, whether it’s charged or not. There are times when customers have to wait 48 hours or more for the bank to reverse their money.” Blockchain gives the status of the transactions to both parties (bank and customer) immediately

According to Obi, the blockchain network used by Zone increases transaction speed, consistency and reliability, as well as the technique used to reconcile ATM transactions.

“With our system, if you complete a transaction at an ATM that belongs to another bank, the ATM sends it directly to your bank over our blockchain; you just need to make a bank-to-bank connection.” “Because there is never a situation where the middle switch is down, our network is faster and more reliable.”

The Nigerian government has approved a new national blockchain policy that aims to institutionalize blockchain technology in the country’s economy and security sectors.

Essentially, blockchain technology enables the development of decentralized applications and new business models that will improve transaction transparency, supply chain security and record-keeping efficiency across various sectors.

According to Obi, the move by the Nigerian government is proof of the fact that blockchain technology remains critical, especially in the payments sector. “The approval kind of clears the air for those who have doubts about blockchain technology.”

“I think the benefit comes from how people will now start using blockchain for different use cases in financial services that have a lot of possibilities.”

The CEO explained that using the technology in the public sector will help develop a more secure and open system for recording important data, including national identities, company registrations, tax registrations and voting records.

The government can use blockchain to guarantee that the documents are safe, accessible and transparently managed. This will strengthen the public’s trust in the government while reducing corruption and increasing efficiency.

In February 2021, the Central Bank of Nigeria (CBN) instructed commercial banks to close the accounts of persons or entities involved in cryptocurrency transactions in their systems. The apex bank cited several reasons why it took the decision to stop banks from facilitating digital currency transactions.

Since then, there have been several discussions between the CBN and market players to see if there would be some sort of adjustment to lift the restrictions and ensure proper regulation.

Obi said “yes”, there is an ongoing conversation. “The truth remains that there are gaps in cryptocurrency that need to be filled. There are systemic issues such as currency controls, lack of capital, KYC and AML.

“How regulators manage how money flows to protect banks. Can you imagine a bank using all its money to buy a coin that collapses overnight? Again, let’s say, for example, someone says, I’ll give you a stable coin for dollars; give me your dollar How do you know he still has the stable coin?”

Obi explains that until systemic issues such as currency controls, capital shortages, KYC and AML are addressed, it remains a danger zone, citing the Silicon Valley Bank crash as a practical example.

“We all saw what happened recently with the SVP crash. The effects are huge. However, Obi maintained that operators need to start looking at cryptocurrencies from a regulatory point of view while working closely with stakeholders to close the loopholes.