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Interview Fintech : Mt Pelerin, the future of banking in Switzerland
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Interview Fintech : Mt Pelerin, the future of banking in Switzerland

Mt Pelerin is the project of Smart Execution, a Geneva-based Fintech that has established itself as an expert in the blockchain field, but not only. Drawing on its origins and inspiration from a liberal economic trend of thought carried by the Mont-Pèlerin Society created in 1947 instead of the same name, the young company has great plans to change the world of banking.

We interviewed Arnaud Salomon, the founder and visionary of Mt Pelerin, to better understand this project with great philosophical and technological ambitions.

 

Can you introduce your company?

Mt Pelerin is a project whose vocation is to become a Swiss bank operating a new revolutionary business model. The latter is based on three fundamental, almost philosophical pillars: 100% deposit reserve, marketplace and tokenization.

The first of these pillars is in line with one of the mottos of the Sovereign Money Initiative - subject of a vote back in June -  namely that customer deposits must be safe and secure. The bank we are going to create will of course act as custodian of its clients' assets, unlike existing banks, we will never use them for our own benefit. Deposits will simply not be loaned and therefore never compromised. We want to be in this way a bank that will cross ages and crises without ever taking the slightest risk on its balance sheet. Thus, our customers will always have the assurance that their property deposited with us will always be available whatever happens. In the case of a new crisis the size of 2008, we will be one of the few institutions to remain standing.

Then, since we will not make credit ourselves we will offer all banking services in a form of marketplace. On the same principle as an Uber or Airbnb, we will have on one side people and companies that have assets to invest and on the other side customers who have financial needs and we will link this supply and demand directly. Here are two concrete examples of what our marketplace will do:

The first example is currency exchange. A foreign exchange marketplace allows anyone to offer foreign exchange and anyone to come and "consume" this offer. Typically, you have euros, someone else has Swiss francs, you want Swiss francs, and so you make a proposal. By matching the opposing needs, we always have the best rate given that instead of paying a commission to the typical intermediary that is the bank, the relationship is directly established between two people. This linking is managed by an algorithm on the one hand that ensures that the transactions are completely compliant with the law, and on the other hand by a robot "market-maker" that offers a price for the purchase and a sale price, which is already on average 10 to 20 times cheaper than most banks. Of course customers will always be free, so if someone has something better to suggest than the robot, they can do it. Our principle is to offer a "what you click is what you get" service, that is to say to know exactly what you will pay when you click, with always the choice to accept or refuse. Our model is based on commissions on each transaction, which are very small compared to what is happening today in the market.
The second example is the loan. Although we will not be able to make loans in the balance sheet, we still want to offer this kind of services to our customers in a form very similar to crowdlending and crowdfunding tools, but always with this concept where we bring liquidity. As a customer, if you need a loan you should be indifferent to it being done by UBS, Cantonal Bank or any other bank. All you are interested in is that your criteria are respected and that you get the best conditions. On a marketplace this is exactly what you will get. The best proposals of the moment will be presented to you, but if they do not suit you then you will be able to make a request yourself and let the system answer it. In a very similar way to crowdlending platforms, we will allow any customer of our platform to participate in loans to individuals, businesses, mortgages, etc. We will have different marketplaces with different types of products and different types of associated risks in order to best segment the offers. This approach will give new power to our clients, as they will be able to directly choose, invest and become involved in projects they believe in.

As for the last pillar, our ambition is to bring 100% of the bank's balance sheet to the blockchain. Indeed, 99% of bank assets are contracts. But one of the main revolutionary aspects of the blockchain is the possibility to create "smart contracts", which is a way to digitally automate the execution of contracts in a completely reliable and transparent way, eliminating the need for intermediaries. We will therefore drive these bank assets in the form of a "smart contract" on the blockchain, as tokens. Without going too far into the technical details, this means that customers will be able to own fractions of bank assets in the form of tokens, which they can then exchange or sell very simply and quickly on the secondary market, starting with our own marketplace dedicated to this use. Often when buying assets, they are locked until maturity and are therefore illiquid. For example, if a restaurant borrows money over two years to buy new equipment, the lender of the money will have to wait two years to get his money back. With our solution, in case of need of money the lender can easily get free of his investment since it will exist in the form of tokens that can be resold at any time on the secondary market. The possibilities this system offers are simply unlimited for both individuals and businesses.
 

Beyond these three pillars, the bank we are going to create will be the first real online bank in Switzerland with a profound technological character. Designed from scratch to automate as many tasks as possible, it will reduce many costs and provide a highly competitive level of service, including:

- Online account opening in less than ten minutes

- An account supporting 30 currencies, that is to say with a separate IBAN for each of them

- A single card offered which allows to debit the correct currency according to the country where you are with an unbeatable exchange rate. The rates we offer are 40 times lower than those of a traditional Visa / Mastercard!

Marketplace change de devises

How did you come up with the idea of creating Mt Pelerin?

I was born in Cannes, France, but I lived there only very young, because we quickly left to live abroad. We lived all over the world, according to the displacements of my father and I grew up in India, in Argentina, and in Czech Republic. I arrived in Switzerland when I was 17, and I have been here almost 20 years now. Through this path, the issues of managing international transfers and multiple currencies have quickly been familiar to me. At the time, the easiest, fastest, and cheapest way to change money was to travel with cash to another country.

I then certified with a Master's degree in communication systems at EPFL, but I have never worked in this capacity since I have always worked in finance, especially as a trader in the commodities and for a year and a half in a high position with a Forex portfolio. That's when I started to understand "what is money? Where is it created? ", " By who ? ", " Why ? "... I first discovered that in this world of traders, few people really understood what they were doing. I dug and then began reading more and more libertarian literature. I was so fascinated by the Austrian economic thinking. It is partisan, among other things, to give freedom to the market with the least possible central bias. We managed to separate the church from the state at one time, and I am confident that we will one day separate money from the State because it is a condition for the long-term prosperity of the economy.

After all these questions, I told myself it was time to get started and in parallel I discovered the Bitcoin which was a revelation for me. How can we create value, where does it come from, how do we bring that trust in these lines of code, more important than in the case of a central banker who can change his mind? I was naturally very interested in the underlying technology of Bitcoin, namely Blockchain.

My goal since then has been to create a real "on blockchain" bank and use this technology to create a new generation bank that will allow everyone to own property that was previously inaccessible to them through "tokenization".

 

What are the different ways that Mt Pelerin is beneficial to customers?

As said before, we are bringing for the first time a bank with which customers will be assured that beyond the CHF 100'000.- guaranteed by the Confederation 100% of their money will be safe since never used. We want to move towards zero risk, and that is a primary source of value for customers.

On the other hand, we go further by solving real problems in people's daily lives, especially with payments that will be free and without commitment thanks to a radically different business model. Thus, you can open an account, use it three times and then abandon it and it will not cost you anything. If you stay with us 20 years, it will be for the quality of our services and not because we will have locked you with a contract.

Finally, as explained tokenization will be an unprecedented source of value, not only for our customers, but for the entire economy as it will bring many new opportunities to finance businesses and individuals as well as opportunities, as well as unprecedented investment at any scale.

 

How do you see the growth of your business over the next 5 years?

We still have a year of license application process with FINMA before we open our doors. We did not want to use a traditional core banking system and we develop our own code, which takes a lot of time. We will then release our services at a rate of 6 months for each new marketplace and each type of product to offer to our customers. We will start by targeting those who have already joined our cause, that is, the crypto world community. What we are doing is historic for them. The first crypto-friendly bank 100% on Blockchain, transparent and 100% reserve for deposits in Switzerland, the only country that has never confiscated money to its citizens, for this community the image is very powerful. We will then propose our offer to everyone without the need for people to understand the tokenization to use it. The idea is really to simplify and democratize complex financial services to solve the problems of everyday life.

 

 

How do you think your technology will be welcomed in Switzerland? And internationally?

Our strategy is global. We have experts in law, banking and finance and engineers, we are not a team focused on visibility at all costs. Maybe this is something we’re missing, but it's also our strength, because we take the time to put things in place and structure them so that they are really in tune with the purpose of the project.

We have been working with a Big Four for a year to shape our banking license and a fundraising that is consistent with our goals. In Switzerland, a bank needs CHF 20 million of capital to start and this capital must be eligible. It's a lot of money and it's not money you can borrow. FINMA, beyond the cash, takes into account a large number of factors that allow or not to obtain a license.

When we wanted to present the project to bankers two years ago, they hardly accepted to meet us. Today, it is incredible, we are contacted almost every week to present the project, the future of tokenization in finance, or how all the costs of back office can be halved thanks to technology. When two banks deal together, as each has its own account book, the accounts must be reconciled at the end of each day, which takes time and contains risks and problems of trust. Whereas if all this happens on the Blockchain, by tokenizing these famous contracts, the "trade" becomes "settlement", the reporting and the balance sheet become automatic and in real time (today a bank has at least a granularity of one day). Finally, when we show all this and explain that we do not need more "back office" or "middle office" to push the button reporting in the balance sheet, they do not believe their eyes. There is a true evolution of the perception of this environment.

 

Do you create synergies with other companies of the Swiss Fintech ? If so why ?

Certainly, because there are many things for which we do not reinvent the wheel and we have great ambitions of collaboration with some Fintech. Some things will happen in a year and a half after we set up our main services. Others are already happening now. Moreover, we work a lot with the Geneva-based banking institutions, especially the private banks because they do not feel in competition with us. For example, we helped them regarding the "due diligence" on the origin of crypto funds so that they could accept the new "crypto-wealthy". We are also working with them on different technology integration projects.

 

In your opinion, is Switzerland fertile ground for Fintech? What are his challenges?

Yes and no. There is a real desire and a sincere speech. Unfortunately, if we look at History, Switzerland took measures a little different from those of the European Union. We talk a lot about the PSD II (Payment Services Directive) which came into force on January 1 of this year, forcing all the European banks to open up to the Fintech, that is to say to let them come and connect to the bank and offer services. It is a law that exists in Europe in which a bank cannot refuse access to data to a Fintech as long as the customer has authorized it. In Switzerland, such regulations do not yet exist.

Before PSD II, there was PSD I. In 2007/2008, at the time of the crisis, Europeans have done something very strong since they have segregated credit institutions (banks) from payment institutions that cannot make loans on the balance sheet. This framework has allowed the explosion of the English Fintech scene in particular.

In Switzerland, at the same time, we had the opposite movement. FINMA has required all players who take deposits from the public to hold a banking license. They made this choice following a strong growth in the number of online "forex brokers", with some of them not being very serious. As a result, many companies have closed or relocated. Some remained and turned into a bank, like Swissquote Bank. Now, the regulatory framework is being relaxed and allows Fintech to make limited deposits at 60 days, which is a step forward.

We feel that there is a real desire to evolve in Switzerland. We started very early discussions with regulators and we were able to present what we do by bringing many answers and placing ourselves as experts in our field. As everyone wants to move forward and have this image of innovator, we feel that there are strong opportunities in Switzerland for companies like ours that can demonstrate their seriousness and do things professionally. We have a unique opportunity to be pioneers.

 

Do you have an exclusivity or message for our readers?

We are creating Mt Pelerin and we will soon call on the public to finance this project. In autumn, we will launch our ICO which will have a very different character from the others. With our legal partners, we have structured this fundraising in a much stricter and serious way than what is available today and we will offer investors something incredible and historic.

We will completely dispossess the intellectual property from the IT system of the bank. People will therefore be able to own this "Avaloq 2.0" and receive in return a royalty representing 20% ​​of the annual net profits of the bank. Holders of this core banking system will also earn 100% of the net license revenue from our system, when other banks will want to install it in parallel or in place of their current system. The number of banks equipped will therefore have a direct impact on the return on investment of our investors.

What we propose is revolutionary and we are proud to soon be able to sell our token to the public . This token will be foolproof from a regulatory standpoint and it will be powerful and innovative as an investment tool, with its passive income and tangible underpinning. If we add the fact that we have also tokenized part of the future actions, we can say that we are preparing to bring Mt Pelerin into the history of the banking industry.