Exploring the emerging trend of using cryptocurrency as a hedge against inflation, highlighting real-world applications and driving economic growth in South Africa.



Cryptocurrencies have had a tumultuous history, often marred by speculation and fraudulent activities. However, the recent decline in public interest has allowed for more realistic applications to emerge, along with appropriate regulation. This maturation of the crypto space has led to an exploration of cryptocurrencies as a potential hedge against inflation.



Ahren Posthumus, CEO of Momint, a tech startup based in Cape Town, believes the reduction in hype has allowed for a focus on real-world projects that are auditable and have a real background. &#8220;We&#8217;re seeing this [crypto as a hedge against inflation] quite a lot&#8230; But not only is it being used as a hedge, it’s also being used as a mechanism to drive the bottom line and solve real problems that South Africa is facing right now,” he says to FORBES AFRICA.



Another notable advantage of cryptocurrency as a hedge against inflation is stablecoins. Since stablecoins are backed by the US dollar, owning them is equivalent to saving in dollars. Storing funds in USDT or earning in other stable tokens like USDC can help keep finances protected from devaluation.



According to Peter Mureu, Marketing Director at Yellow Card, “The rand has dramatically lost its value over the past decade. From ZAR10 for $1 in 2010 to almost ZAR20 for the same amount now, the purchasing ability of the rand has nearly been cut in half. Investing in crypto, especially USDT will allow for that risk to be halved and increase the ability to purchase alternative power sources to deal with the current power issues/load-shedding. For those earning in USDT, even the lack of power is an easily surmountable problem because the USDT is constantly appreciating regardless of the state of the rand.”



One such problem is South Africa’s current energy crisis. The combination of large tax rebates for investments in renewable energy, coupled with platforms such as Momint, has seen large growth in realistic applications for cryptocurrencies. “Our tokenized, fractionalized solar investments qualify for Section 12 rebates… this is massive,” continues Posthumus.



Lerato Lamola, consultant and crypto specialist at Webber Wentzel, notes that South Africa’s legislative process seems to be in line with this, with the country classifying crypto as a financial product rather than a security. This allows crypto to be managed more easily within the framework of existing financial instruments.



“South Africa is really focusing on the man in the street,” says Lamola. “South Africa is now focusing more on how crypto is impacting retail consumers.”



Cryptocurrencies and blockchain technology are emerging as potent tools for socio-economic development in Africa, particularly South Africa. By facilitating low-cost remittances and microloans, they&#8217;re creating meaningful changes that uplift the economy.



Posthumus sees the burgeoning sector as a vehicle for innovation and economic growth, asserting that cryptocurrencies could engender a more equitable financial system by enabling secure and cost-effective transactions.



In Africa, cryptocurrencies and blockchain technology are no longer theoretical concepts; they have become practical tools driving tangible change. Platforms such as Momint are already realizing this – one such example is the ability for users to fractionally invest in renewable energy projects, allowing investors to generate returns, take advantage of renewable investment tax breaks, and invest in sustainable development.



Cryptocurrencies in South Africa and Africa are increasingly seen as more than just volatile investments, but as powerful tools.



&#8220;The biggest thing for us is about having a product that people can use and understand. It’s about education, and we need to be building that trust with the consumer,” adds Posthumus.

Bitcoin on digital circuit board and graph

Crypto As Inflation Hedge: South Africa’s Innovative Approach To Digital Assets

When Citigroup opened 2020, the most ambitious projects at the $2.2 trillion in assets lender involved major partnerships with technology companies best known for their internet, social media and ecommerce platforms.&nbsp;



In China, nearly 70% of the payments that Citigroup handles for customers are done through AliPay, the payments business spawned by Alibaba. Citigroup’s digital payments technologies are also present on other popular social messaging platforms like LINE and WeChat. The mega-lender recently launched a credit card partnership with fintech Paytm in India and in Singapore it uses chatbots on Facebook Messenger to help answer customer service inquiries. In November 2019, the bank made a big splash in the United States by unveiling a digital checking account with Google Pay.



These partnerships are part of a new reality for the banking industry’s most important players like Citigroup: Innovative and seamless digital banking capabilities are paramount in a business where basic financial products have become commoditized and rock-bottom interest rates make it hard for lenders to differentiate. Consumers are instead voting with their smartphones, demanding the ability to conduct their financial activities safely and easily on mobile phones and their desktops.



Never were these growing demands more important than during the coronavirus pandemic, which forced countries around the world to announce lockdowns to combat the spread of the virus. Unable to visit bank branches, consumers turned to mobile apps and online services to get transactions done. In the U.S., Citi saw an 84% increase in daily mobile check deposits in May and a tenfold surge in activity on Apple Pay as quarantined customers used digital and contact-less tools to handle their financial activities. The lender’s Mexican operations saw an 80% increase in mobile app logins in March. Downloads of its mobile app surged 116% from February to April, while digital bill payments rose 78%.&nbsp;



“Banking has changed irrevocably as a result of the pandemic. The pivot to digital has been supercharged,” says Jane Fraser, president of Citigroup and CEO of its gigantic consumer bank. “We believe we have the model of the future – a light branch footprint, seamless digital capabilities and a network of partners that expand our reach to hundreds of millions of customers.”



Citi’s increasingly digital approach is visibly evident in Forbes’ second ranking of the World’s Best Banks, based largely on customer satisfaction surveys. Citi rates highly in six of the 23 countries where customers were surveyed (Citi has retail operations in 19 countries).



Forbes partnered with market research firm&nbsp;<a href="https://www.statista.com/" target="_blank" rel="noreferrer noopener">Statista</a>&nbsp;to measure the best banks in nearly two dozen countries. Statista surveyed more than 40,000 customers around the globe for their opinions on their current and former banking relationships. The banks were rated on overall recommendation and satisfaction, as well as five subdimensions (trust, terms and conditions, customer services, digital services and financial advice). Between 5 and 75 banks were identified as top banks in each country, based on the total evaluations collected, the number of banks in the specific country and the scores achieved.



The 2008 financial crisis didn’t just usher in an era of consolidation and low rates that reshaped the banking industry globally, it also coincided with the mass adoption of the smartphone and a shift to digital banking. In the wake, a crop of web-first lenders emerged to challenge the world’s biggest banks and made offering end-to-end mobile banking features a matter of survival. The coronavirus only affirmed that there’s no looking back.



Amsterdam-based ING, ranked highly in eight nations, leading banks worldwide on our list in its reach. The lender, which has a legacy that dates back to the mid-1800s, is a technological pioneer in the banking industry, creating digital bank ING Direct in 1997 at the dawn of the internet age. While ING operates hundreds of bank branches in the Netherlands and Poland, it is known as an entirely web-based bank in markets like Australia, Germany and Spain where it ranks in the top-five.&nbsp;



ING now handles some 4.5 billion digital contacts a year, according to Aris Bogdaneris, head of challengers and growth markets at ING, and it is embarking on an effort to make its digital services uniform worldwide. “We are inspired by the giant technology platforms and their customer engagement,” says Bogdaneris, who points out that user experiences for technology platforms like Uber are the same, regardless of where a customer is located. “We started measuring ourselves more against these platforms than against traditional banks,” he adds.



Now, with Covid-19 affirming most digital banking trends, Bogdaneris wonders whether ING will go all-digital. Says Bogdaneris, “Where we have physical distribution and literally closed branches, [the question is] do we reopen them again? Do we actually need them?”



The other banks that rated highly in more than five regions include HSBC and Santander at six apiece, and digital bank N26, which rated first in Austria and Italy second in Spain and France, and #29 in Germany. Founded in 2013, N26 stands out because it has no physical branches but offers free ATM withdrawals worldwide and recently raised $270 million as part of a Series D round that valued the firm at $3.5 billion.&nbsp;



Digital upstart Nubank is the top-rated bank in Brazil, beating out an oligopoly of legacy banks on our list. “The penetration of the internet and the penetration of smartphones created a window of opportunity for us,” says founder and CEO David Velez. “Even as a startup we could compete head-to-head with the big banks. Suddenly, you didn&#8217;t need billions of dollars to build bank branches and you didn&#8217;t need hundreds of millions of dollars to buy mainframes from IBM. You could use the internet to acquire customers,” adds Velez, “It enables a model that has fundamentally lower costs and a better user experience.”



Growth at Nubank, which operates throughout South America, has been staggering. In 2019, the lender saw its customers surge from 6 million to 20 million and its private valuation now stands at $10 billion.



If there’s any doubt that digital-first banks are the way forward, Velez offers a surprising statistic: Since the pandemic began, Nubank has seen a surge in customers aged sixty and over, the types of clients many bankers once believed would never leave traditional branch networks. Over the past 30-days, for instance, some 300 clients above the age of 90 have become Nubank customers.



Digital banks rated well in the United States as well. Online-only Discover and Capital One ranked #23 and #30, while neobank Chime ranked #36. All three beat out mega-lenders JPMorgan Chase, #36 and Citigroup #71. The other big four lenders, Bank of America and Wells Fargo, didn’t make the top-75.



USAA was the highest-rated bank in the U.S. The bank is open to members of the U.S. military and their families and has more than 13 million members.



&#8211;<a href="https://www.forbes.com/sites/antoinegara/">Antoine Gara</a>, Forbes Staff, <a href="https://www.forbes.com/banking-insurance">Banking &amp; Insurance</a>

Tag: digital banking

FORBES AFRICA SOCIAL MEDIA

Crypto As Inflation Hedge: South Africa’s Innovative Approach To Digital Assets

The World’s Best Banks: The Future Of Banking Is Digital After Coronavirus

Mastercard: Diligent About Digital In Africa