What is often taken for granted in our banking institutions has long standing and complex roots, simply overlooked in the array of historic brand names and associations in which they are portrayed. As such, banks play an integral role in economies but historically questions have been posed on the relationship of the banks and society in general. Henry Ford once said “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Decades on, many would argue the same is still true today, particularly so after the collapse of Lehman Brothers and the LIBOR rate scandal of 2008.
The pivotal question is, has the traditional banking sector eroded trust? Unequivocally, to some degree after 2008, it is inevitably so. Banking scandals are synonymous with the sector’s leading brand names, yet we continue to bank with them, as hostages to their perceived monopolies. Some would argue that banks have developed a certain culture of justice, disseminated in the form of compliance and have become too big to fail, as the impact of such failure on incumbent fiat currencies and their host economies must be avoided at all costs. However, in recent years technological innovation built upon the global advent of the internet seems to have altered this fiscal framework.
The strategic position of fiat currency has been dismantled in the last decade by the rise of decentralised finance, based upon blockchain technology giving birth to cryptocurrencies, such as Bitcoin, that are beyond the control of banks or governments. A plethora of fintech companies around the world from garage startups to giants inflated with venture capital millions are purporting to provide access to various segments of the brave new de-fi market. However, very few seem to have developed a regulated, comprehensive business model incorporating both the conventional fiat banking and blockchain-based financial services into one integrated, simple and compliant neo-banking phenomenon. Those who seek such a new model should look no further than Migom Bank for a regulated, secure and high-tech entry point into decentralised finance fused with the best of traditional European-standard banking.
To contemplate the systemic shift beginning to take place in the financial services industry is to foresee the future of the modern digital economy – from the metaverse of Facebook, to the rise of digitalization and decentralized finance as the examples of instrumental forces, redefining the role of the centuries-old middleman. There are already glimpses of the future successfully operating in the present day. Migom Bank is among the few neobanks in the world catering to emerging asset classes that redefine the customer relationship with the means of value exchange. Migom Bank has pioneered regulated custody with cryptocurrency bank accounts, tied to digital banking and merged with the traditional fiat deposit, custody, lending and payment services.
Historically bank customers have only held one currency in one or two accounts but customer understanding, needs and expectations have changed. The modern-age customer tends to have a number of bank, brokerage and crypto exchange accounts with a variety of big name banks as well as recently established fintechs, some of which lack proper structure and regulation despite their widely publicized brands. As a result, customers are forced to go through a variety of complex onboarding and compliance procedures, and hold multiple accounts with institutions, some of which are at odds with one another, for example, with British high-street banks banning their customers from transacting with Binance.
Migom Bank has reacted to the demand with a unified, transparent and compliant financial service integrating crypto and fiat aspects by building a proprietary digital asset exchange and custody solutions, to Swiss standards with their European correspondent banks and seamlessly integrating it with traditional fiat banking. Banking with Migom underpins a modern lifestyle with custody for fiat money, as well as legacy and digital assets such as Gold and Bitcoin in one comprehensive account, or exchanging fiat currencies at interbank rates or seamlessly going from crypto to fiat in one click on one screen. With all the crypto and digital asset features tied to traditional banking with innovative compliance and risk mitigation, all removes the need for the customer to engage with multiple vendors and dramatically reduces friction in managing one’s finances.
Bitcoin has survived a tumultuous entry on the global stage, from the failures of Mt Gox and the notoriety of the silk road, to be recognised as transformative for peer to peer transactions. For the first time in the history of the world, anyone can send or receive an amount of money, with anyone else, anywhere in the world, without asking permission from any bank or government. Of course, to do so there are risks in navigating the complexity of blockchain transactions and many service providers seek to demystify this journey. Very few, such Migom Bank, are regulated in this regard and can boast their own proprietary technology to service clients needs, satisfying both the rigid regulatory requirements of combating money-laundering and financing terrorism and the demand by customers for agile, secure, convenient business and client-centric service.
Banking is an evolutionary topic, whose direction has been defined and determined by many influences over millennia. Banks initially emerged throughout the course of history, simply to service the needs of businesses and individuals, and of course they had to make a profit too. There are events on the journey that have shaped these entities, steeped in history. These waypoints occur in ancient civilizations; from the Order of the Templars and into post medieval Europe, then notably, the formation of the Bank of England, onwards through the renaissance, gunpowder and industrial revolution to where we are today in modern history.
There are periods of accelerated change. In the last fifty years, the medium of value exchange has evolved more than at any time in human history. Arguably this shift began in earnest in 1971 when Nixon abolished the gold standard, at one point it was even illegal to own gold, forcing savers to buy government bonds. The age of the Fiat currency had begun, and the classification of a new era in banking along with it. Fortunately, in the current age of digital revolution, assets can easily be accumulated with regulated financial institutions using distributed ledger blockchain technology, smart contracts and other newly emerging instruments of decentralized finance. With Migom Bank for example it can be accomplished through its digital gold coin offering, allowing customers to own fractions of gold, redeemable into whole, physical, one ounce coins, bringing back the gold standard in the age of unquantifiable fiat currencies.
Terms define our understanding. Banks are, well… just banks, surely? Steeped in history, strong sovereign connotations, government backed (when needed), conduits of quantitative easing and the pillars of the post World War II economic order. All the above makes the global economy turn – billions, even trillion of dollars in trade, however, there is an existential divergence here from the historical purpose of banks, which is to serve the needs of customers. Joseph E. Stiglitz, the renowned American economist once said “Rather than justice for all, we are evolving into a system of justice for those who can afford it. We have banks that are not only too big to fail, but too big to be held accountable.”
Banks, many would now argue, are self-serving to maintain the status quo and provide returns to shareholders. Despite the 2008 financial crisis that was a time of reckoning for the industry, from which bank share valuations have not yet recovered and yet the banking system has not fundamentally changed its outlook. The same cannot be said for Migom Bank and other neobanks that rely on the transactional activity of their customer bases alone for survival. In the world of the neobank, the fittest, offering the best service, thrive.
Innovating to sustain this two way relation is essential. Migom Bank, for example, is working on bringing a reliable regulatory framework and innovative technology to micro lending against collateralized crypto assets, a brand new and explosively growing niche discovered and populated mostly by unregulated and undercapitalized fintechs. Extremely low overhead of its lending business model and a high degree of its automation allows Migom Bank to offer higher than average interest on long-term deposits available to its customers. In every sense the relation between Migom Bank and the customer is reciprocal and fair.
In a relatively short time a regulatory oversight gave birth to challenger banks – ostensibly the traditional model, split into a new entity with a mixture of assets and clients, to mitigate the monopoly effect of the traditional behemoth. These new entrants continued to provide a service to what is typically over-served markets. The next chapter, the age of digitalization, began with a combination of technological advances in cellular networks, consumer devices and critically, scalable cloud computing. Migom Bank is the perfect example of a bank in your pocket; digital, accessible and versatile in an ever changing world.
In an even shorter period the financial sector changed again by the force of these outside influences with the appearance of more classifications; e-money providers, digital exchanges and fintechs, all of which were propelled onwards by technological advancement, with a regulatory influence to help understand a dramatic shift in consumer awareness, behavioural patterns and investor speculation in the financial sector. Unregulated providers with limited oversight have led to dramatic losses in customer deposits in the tokenized crypto economy. Migom Bank puts safety of customer funds first, with bank grade security surrounding its customers and custody of clients’ assets with its correspondent banks across Europe.
Despite the events of 2008, incumbent banks benefited from a dividend of historical trust but regardless, the new entrants, neobanks and fintechs, such as Revolut and Monzo have gained a generation of tech savvy consumers in mature economies by exploiting the digital service gap. These nimble service providers are completely digital but are not always fully regulated and may even use services of traditional banks for custody of assets. Often they are e-money providers, with aspirations for a full banking licence. As part of the translation and growth story many have begun to build social and technological capital but still service a relatively small market segment in terms of geography and financial service provision.
Fintechs typically, while innovative, are on a high growth trajectory, predicated upon investment to build a product that will gain market share and become profitable. Many even target their growth for the merger and acquisition market, by a flanking move from an incumbent bank or bigger player. As such it could be ventured whilst they do serve customers by filling a service gap, they are perhaps not a holistic solution, sustainable or responsible enough to engage underserved markets and tackle the ‘unbanked’ challenge in emerging market economies.
The conception of Migom Bank as a modern digital institution is explained by the bank president, Thomas Schäetti, “We consider our emergence to be confluence of opportunity – while fully digital, Migom Bank is quite simply a modern bank, created without venture capital investment, to service the needs of customers in geographies that, despite being technologically able to benefit from digitalisation, have been unable to do so due to the cultural challenge barrier of compliance, entrenched in the operating model of traditional banks.”
Legacy systems, leadership and perhaps an influence of their traditional markets, has resulted in banks that are not truly global in their outlook. As an example, operations remain mired in unnecessarily complicated processes around compliance. Migom Bank stands in stark contrast to incumbent providers, built in modern times to service a modern world, Migom Bank is proud to deliver a purpose-built mobile banking solution geared for the future without any sacrifice of the high regulatory compliance standards.
Thomas Scheätti candidly talked about the bank’s long-term investment in proprietary technology to service digital assets “The “Whole in One℠” business model of Migom Bank delivered the novel and harmonious integration of the traditional financial services with innovative cryptocurrency banking, where crypto assets are treated as equals of value exchange with fiat money, allowing customers access to obtain both, in a compliant and safe environment.”
Migom Bank also identifies with emerging pro-western markets. The term emerging markets has connotations to parts of South America, Africa and Asia, which is entirely valid but within the sphere of Europe there are also overlooked pro-western economies, not yet part of the EU, that are in every sense striving for economic growth and financial inclusion. Migom Bank is striving to practice an ethical and responsible view that regardless of location or ethnicity, secure financial service provision is tantamount to a human right.
The traditional banking sector retains a tight grip on the industry as a whole but the landscape is gradually changing. Decentralized finance is disrupting the old order and ushering in an age of monetary exchange that is not the domain of any nation state, adding transparency and immutability into the value chain and also removing the barriers of fiat exchange rates – all of which facilitates international finance and economic growth. Migom Bank took great pride this year in celebrating the first birthday of its fully regulated Bitcoin bank account and supports regulated custody of Ethereum, USDT, USDC as well as several other leading cryptocurrencies in addition to Bitcoin, all of which could assist customers in international remittances.
Thomas Scheätti concludes “At Migom Bank, we believe we are at the beginning of a fundamental shift in valuations from traditional banks to the modern bank, which as a one stop shop can service all the needs of financial intermediation in the newly emerging economic order. As a wholly owned subsidiary of a financial holding company, Migom Bank’s goal is to lend a competitive edge in service provision in multiple geographies developed by our group as a whole. In many ways, this structure listed on public markets offers investors an open-ended opportunity to tap into the growth of emerging financial services led by a Modern Bank, designed for the digital future.”