Technical innovation is transforming industries. The development of the internet has completely changed the business models of media, entertainment and shopping, to give just a few examples. However, so far banks have remained relatively untouched by the information revolution. A new generation of innovative fintech companies could be about to change that.
Of particular importance is the emergence of blockchain technology. Blockchain offers security and transparency, both essential to any financial institution. New companies like Swiss firm Mt Pelerin are pointing to a new way of managing money.
Arnaud Salomon, the Founder and CEO of Mt Pelerin, explains that the power of the internet “has yet to translate into a new paradigm in the world of banking.” As the industry is “protected by heavy regulations”, the sector has “remained until now a walled garden hermetic to disruption.” Salomon aims to “build the bridge between our new digital society and the ageing banking industry, through a strong vision of transparence, performance and freedom.”
Despite the enormous advances in processing and sharing information, banks have clung to a high fee model. They have also continued to use customer funds on risky investments, further eroding customer confidence.
If the current model does not work for the majority of customers, how has it managed to survive so long? Banking is a highly regulated industry with extremely high barriers to entry: innovative competitors have been kept out of the market.
Fortunately for consumers, new models are finally becoming available as a new generation of fintech companies challenge both the dominance of the big banks, and assumptions about how a bank should function.
Mt Pelerin aims to empower its customers by giving them control over their own funds as well as access to investment opportunities which are normally only available to investment banks and large corporations.
Strikingly, all customer funds will be held in reserve. Mt Pelerin will not lend out its customers’ deposits on risky investments. Indeed, it will not touch its customers money at all.
Instead Mt Pelerin will generate profits by creating product marketplaces which aggregate offers from many different providers. Not only will this offer customers greater choice, but the increased competition should lead to considerably lower charges to customers. Mt Pelerin will charge a small fee on each transaction, thus ensuring its continued survival.
This marketplace model is also extended to customers, who will be able to offer or request services. An example of this might be the loan marketplace, where a customer could suggest a loan deal at certain conditions, and another customer, if they accept those conditions, could lend the money.
This is made possible by the use of blockchain technology. All deposits and assets on the Mt Pelerin platform will be tokenized, which makes them easy to transfer, divide and manage. Due to the tokenization of assets, customers will have access to asset classes which are currently out of their reach.
The new technology also allows for innovative ways to create the marketplaces. They will be built as open platforms, onto which micro-services can be added from third parties. This open banking model is designed to benefit all users and foster innovation.
Mt Pelerin customers will be able to access basic services for free and will receive a multi-currency bank account and debit card. The company aims to receive all relevant Swiss banking licenses in late 2019.
Mt Pelerin is currently conducting a public sale of its tokenized share, the MPS token. Each MPS token is equivalent to one share in Mt Pelerin Group SA.