Most dictionaries define a bank as a financial establishment that receives money from the public and uses it to issue loans and for other financial operations. Banks tend to be divided into three categories based on the type of financial services provided:
A Commercial Bank or Retail Bank or Depository Bank: this is the most familiar type of bank. It receives and holds its clients’ money, provides payment methods (like debit cards and checks) and issues long-term loans.
Asset Management Bank: this type of bank manages the capital entrusted to it by its clients by investing according to the risk profile of each client. The goal is to obtain the highest return on investment possible relative to each client’s level of risk-aversion.
Corporate and Investment Bank (CIB): this type of bank is specialized in what are referred to as “equity transactions”, namely initial public offerings (IPOs), debt issuance, mergers and acquisitions (M&As), etc.
When one institution provides all three types of financial services, it is referred to as a ‘universal bank’. Currently, we only plan on becoming a commercial bank.
A commercial bank has three main functions:
When an establishment is able to perform all three of these functions, we refer to it as a credit institution, which is a synonym for a commercial bank. If an establishment only provides payment methods and services, we refer to it as a payment institution.
Loans issued by commercial banks play a crucial role in financing the economy (see next question). This activity is not without risk: while in theory, a client who has deposited money is allowed to withdraw all of it from one day to the next, the reality is that the bank has usually loaned part of these funds to another client for a period of years. Therefore, the rules of engagement for this type of activity must be clearly defined.
A commercial bank faces many challenges:
The success of a commercial bank depends on reciprocal trust with its clients and on effective risk management.
Commercial banks play a crucial role in the economy: they allow projects to be financed using otherwise inactive funds. They are, in short, purveyors of the temporary redistribution of liquidity.
Established banks are, of course, already doing this: for example, according to the French Banking Federation, at the end of 2016, the total amount of loans outstanding made to SMBs was an estimated 385.1 billion euros. That said, traditional actors are sometimes limited by internal constraints they have accumulated over the past few decades:
In light of this, we are convinced that a new credit institution, unhindered by these constraints, could bring added value to the economy, particularly when it comes to SMBs.
Our offer is built upon three guiding principles:
Concretely, this means we will offer:
In addition, each client will receive personal attention and tailored guidance from a team of experienced bankers who set themselves apart in three key areas:
We are convinced that banks have an important role to play across all segments of the economy: individuals, microenterprises, small and medium-sized businesses, large companies, etc.
However, after careful analysis of each of these categories, we determined that existing banks are more or less fulfilling the needs of individuals and large companies. The range of offerings is wide, and there is a healthy level of competition. Microenterprises and SMBs, on the other hand, seem to have been somewhat left behind. Therefore, we are convinced that a modern banking solution combined with the support of an experienced banker would bring the most added value to these segments and more specifically to SMBs.
Our business model will be the same as that of a classic commercial bank:
For each of these, we plan to offer adaptable, straight-forward pricing.
Several banking software solutions already exist in today’s market. The strength of these technologies is the fact that they have proven themselves in terms of managing pretty much all of the needs of existing banking institutions. Their weakness, however, is that they are based on aging technology which is poorly suited to the creation of a new banking establishment and to the collection of an ever-increasing amount of data.
We decided to develop our banking infrastructure ourselves in order to:
Our banking infrastructure uses several:
Kotlin, a modern programming language (functional and object oriented) which guaranties total interoperability with the entire Java ecosystem. Java is another, older programming language, but one that has proven itself and has been widely-adopted. We use Kotlin to develop our back-end services (not including our transactional core), such as the credit issuing engine.
Elixir, another functional programming language which guaranties total interoperability with the Erlang ecosystem. Erlang is a language invented by telecommunications companies to manage a large volume of messages with very high reliability and very little downtime. This is useful when you need to manage a large number of financial transactions. We are using Elixir to develop our transactional core.
Amazon Web Services (AWS), Amazon’s web platform which provides virtual servers and hosts numerous infrastructure services (databases, message files, secure virtual private networks, ID management, etc.). We are using AWS to develop and deploy our banking platform.
Our aim is simple: to provide solid financial advice and support to European small and medium-sized businesses.
We want to give them the financial products and services they deserve (a modern and intuitive current account, fast credit at competitive rates) along with the guidance of seasoned bankers. Our offer is inspired by three fundamental values: expertise, technology, transparency.
To make this kind of banking institution a reality, we are focusing on obtaining a full banking license, building our own technical infrastructure, and carefully hiring and training our bankers.
Before we started exploring actual names for our future bank, we first narrowed down our selection criteria. We wanted something short, memorable, relevant, easy to write and pronounce in French and other European languages, and most importantly, not already taken.
We were quickly won over by the idea of a person’s name since this was very much in keeping with one of our core values: putting the client relationship back at the heart of banking. We also felt that a woman’s name would set us apart in an industry dominated by masculine symbols (lion, bull, etc.).
After several months of reflection, we decided that Margaux, spelled Margo to facilitate later international use, truly fit the bill. We were inspired by Marguerite Boucicaut (Margaux being a popular nickname for Marguerite), the legendary businesswoman who co-founded Le Bon Marché with her husband Aristide (and ran it after his death). Together, they invented many of the principles of modern commerce. You can (re)discover her universe in Emile Zola’s Au Bonheur des Dames which draws largely on the Bon Marché model.
The banking industry requires a high level of cross-disciplinary collective intelligence. This is not a project that could be put together by two engineers or two marketing whiz-kids in their garage. A bank requires strong collaboration across multiple areas of expertise. For each of these areas, a very intellectually-stimulating list of questions emerges that must be addressed in order to be successful:
Technology – How do you securely house billions of euros? How do you guarantee the reliability of transactions? How do you provide the same quality of experience on a mobile device as on a computer? How do you design, deploy, and oversee the system to ensure 99.99% uptime? How do you counteract fraud? How do you collect data in real time in order to inform AI algorithms? How do you design an infrastructure that is sufficiently open and flexible that it can accommodate future offerings without creating something that ultimately becomes fragmented and obsolete?
Marketing – How do you install trust when you don’t have a track record? How do you create a brand that can stand the test of time? How do you reach a clientele, SMBs, that is already inundated with comms? What kind of strong and unique messaging does the bank need?
Risk and Compliance – How do banks function on a cellular level? How do you obtain a full banking license? How does a new banking establishment limit its credit exposure? How can regulatory constraints be adapted to address the needs of young structures? How do you define your credit issuance policy?
Product and Design – How do you create a user experience for both clients and internal users that is second to none? How do you design a product when you aren’t the end user? How do you create one simple and intuitive interface that addresses all the commercial, technological, regulatory, and client constraints? How do you allow for client initiative and flexibility as well as appropriate oversight within the same product?
Commercial – What role does a banker play in the midst of multiple professional service providers (accountants, lawyers, etc.)? How do you turn situations into a win-win for clients and the bank? How do you offer transparency while protecting data? What expertise can you share with a client based on the analysis of his financial data? How can you give decision-making authority to bankers while avoiding conflicts of interest?
Human Resources – How do you attract the best talent in each of these areas? How do you collaborate effectively across these different teams? How do you fairly and appropriately reward each contributor? How do you ensure that the company culture minimizes conflicts of interest?
The official launch of our offer is contingent upon obtaining our banking license and is also dependent on the sufficient advancement of our technical development. As a general rule, we do not want to announce a date that may be subject to change. However, we are in a position to say that while we will not be opening accounts in 2018, we are doing everything in our power to make this a reality in 2019.
Our objective is clear: to become a commercial bank. It follows then that we cannot say we are:
A start-up: even though we highly value several of the tenants of start-up culture (empowered teams, agile development, an obsession with product quality, stellar customer service), we consider our project to be more in line with the banking sector than with new technologies and the Internet.
A fintech: even though we love the idea of a union between finance and technology evoked by the word, ’fintech’ commonly denotes a sub-category of start-ups (see previous point).
A neo-bank: stricto sensu the word describes our company perfectly. Unfortunately, the term was hijacked by start-ups which were not truly new banks in the proper sense. These tended to be payment institutions that didn’t have the legal authorization to use the word ’bank’ and therefore, chose a similar term, thus distorting its meaning and making it an improper moniker for us.
An online bank: we do not classify ourselves as an online bank for the simple reason that part of the client relationship will involve meeting in person with our bankers. That said, the entirety of our services will, of course, be available online.
We feel that the terms (new) bank, (new) banking establishment, or (new) credit institution best describe our company.
Blockchain is an information storage and transmission system that is operating unchecked. According to its most fervent proponents, the decentralized nature of blockchain should allow it, at least in theory and in the long run, to forgo intermediaries such as banking establishments.
This line of reasoning ignores the fact that banks are not simply secure storage units for funds; they also serve to finance the economy (with an appropriate level of risk and reward) and to provide advice and support to their clients (see previous questions). This is all the more pertinent when their clients are businesses. From our point of view, applications based on blockchain will not be able to replace banking expertise.
Several initial experiments have shown that when computers are properly trained using Machine Learning techniques, they are capable of performing certain tasks more quickly and more accurately than human beings. Some people are already imagining that the majority of jobs as we know them today will disappear.
We have a more tempered viewpoint: while we are confident that artificial intelligence will profoundly change the banking industry, we remain equally convinced that human interaction is irreplaceable when it comes to many important elements, namely the building of trust between a client and his/her bank (see next question).
To state it simply - no. Humans are social creatures; it is in their nature to connect to one another. These connections are reinforced by repeated interactions until they become relationships, and these relationships are the foundation for (e)-commerce.
Banking is an advanced form of commerce. It requires trust and time. It also requires strong social links, which only humans are capable of creating.
Therefore, our goal is to foster these kinds of meaningful relationships between bankers and their clients by creating an environment that is conducive to positive interactions. It is with this in mind that we look to tools powered by artificial intelligence to help bankers and clients optimize their exchanges without changing the fundamental nature of the relationship.
In just a matter of years, GAFAM (Google, Apple, Facebook, Amazon, Microsoft) have been able to assert themselves in our economy and in our lives to the point of being virtually unavoidable. In the process, they have been collecting massive amounts of data. This unparalleled technological prowess has led many to predict that these new actors are primed to disrupt the banking sector.
We, however, do not believe that GAFAM have the corporate culture necessary to make any real headway. Banking is highly regulated and relies heavily on trust; to be effective, established and hopeful actors in this sector require perseverance and resilience. With a culture rooted in initiatives where rapid indicators of success are expected, GAFAM are unlikely to have a lasting impact on the banking industry.