The private bank Maerki Baumann & Co. AG and the transaction bank InCore Bank AG are among the pioneers of a new banking era. An interview with CEOs Dr. Stephan A. Zwahlen and Mark Dambacher about the fusion of the old and new financial world.
This past spring, they received authorization from the Swiss Financial Market Supervisory Authority (FINMA) for brokerage, custody, transfer and generation of digital assets. Read the following interview to find out what this new sector is all about, why it is so important and what the CEOs of both companies expect to achieve.
CVJ.CH: As a traditional, long-term oriented Zurich private bank, what made Maerki Baumann engage in discussions with its clients about digital assets?
Dr. Stephan A. Zwahlen, CEO Maerki Baumann: We believe that blockchain technology has the potential to significantly change our economy and society. We also see interesting additional investment opportunities, which we would like to share with our clients. Since June 2020, we have been building a bridge between traditional private banking and the innovative crypto business with the trading and custody of digital assets.
As a regulated bank under Swiss law, we enable our clients to enter the world of digital assets with the maximum degree of security. Not only the younger, technology-savvy individuals will benefit from our new services, but also private and institutional clients looking for new return opportunities through digital assets or wishing to diversify their portfolios more broadly.
Is this client need the reason why InCore Bank as a transaction bank entered the world of digital assets?
Mark Dambacher, CEO InCore Bank: Certainly, it is as well. Besides, in countless client conversations with clients throughout the past months, we have noticed that the curiosity and interest in the new field of digital assets is very high. At most external events, I have been constantly asked about blockchain, crypto currencies and tokenization. However, that was not the only reason why we wanted to open up this business area. Rather, we concluded that crypto currencies, as digital assets, are a valuable addition to modern asset management and will be indispensable as a payment and investment asset in the future.
What do you expect from this new digital world of investment?
Zwahlen: The developments in the area of crypto currencies and the underlying blockchain technology are very dynamic and have far-reaching implications for investors as well as the banking industry. We firmly believe that digital assets will be an integral part of professional investment advice and asset management in the future. As a dynamic, flexible financial institution, we stay on the pulse of events and want to react quickly to market changes. In this way, we are also addressing the increasing challenge in private banking to achieve sustainable returns for clients at reasonable conditions. Digital assets promise new, attractive and cost-efficient investment opportunities. It is also understood that clients must be transparently informed about the increased risks involved in this nascent sector.
Dambacher: We want to offer our clients, primarily financial service providers such as Maerki Baumann as well as institutional clients, the entire range of services as a one-stop solution. To achieve this, we have established a well-coordinated team of banking and compliance experts, capable of serving both worlds - traditional and digital asset classes. As part of a strategic project, the newly created "Digital Services" division has been working on the introduction of these new services over the past few months. Digital assets are fully integrated into the core banking system, from e-banking to asset reporting, the end client benefits from a user experience just like that of traditional banking.
The entire subject is very technology-driven, and keywords like blockchain, crypto currencies or tokenization are not easy to understand. How do you explain this new innovative asset class to newcomers and less experienced investors?
Zwahlen: More and more people want to benefit from the possibilities of blockchain technology, whether in payment transactions or in investments. Of course, not everyone wants to dive into the depths of blockchain technology. As a trusted partner, we can help to increase the understanding of crypto applications and point out the associated opportunities and risks. Finally, through reliable trading and safe custody of digital assets, we provide our clients with easy and fast access to the new asset class.
Dambacher: One can get lost in the technical details of crypto currencies, which is true. However, investors and asset managers will not have to dig that deep. Most importantly, we emphasize that this is a completely new evolving asset class, with inherent risks. Anyone investing in real estate does not necessarily know how to build a house! This is usually left to the professionals, just like the investment into digital assets.
Can you still briefly explain how a digital asset is generated?
Dambacher: In principle, these are material and immaterial assets, which are digitally displayed or tokenized and thereby made tradable, for example a patent or a property. These digital assets are stored on a blockchain in an immutable, secure and transparent manner - it is the underlying technology that enables this.
Zwahlen: Since the entire process is digital, both denomination and trade can be handled cost-efficiently. In contrast to many traditional asset classes, investment in digital assets can lower transaction costs. There is a need for action in establishing liquid, compliant and transparent secondary markets that ensure efficient trading of the tokens.
Dambacher: In the future, assets that are currently still "non-bankable" will be able to be represented as digital assets in the form of security tokens. This area will gain enormously in importance, which is why InCore Bank is proud to play a pioneering role in the Swiss market. With the "Security Token Services" from InCore Bank, companies will be able to manage their assets more easily and cost-effectively and raise new capital. InCore Bank provides financial institutions with the entire range of services from generation, distribution, brokerage and custody of tokens.
There are also many uncertainties associated with new technologies and forms of investment. How do you alleviate your customers' concerns about the security of their investments and data?
Zwahlen: For the custody of digital assets, we rely on modern technologies and the expertise of experienced partners such as InCore Bank. The multi-layered security architecture is designed to provide maximum protection against cyberattacks and unauthorized access. All data is saved in heavily protected facilities in Switzerland. As a Swiss bank, we meet all the relevant legal and regulatory requirements based on our proven processes and innovative security solutions. We believe that our long heritage, stability and reputation as a reliable bank provides us with a competitive advantage.
Dambacher: As an established transaction bank in Switzerland, InCore Bank benefits from many years of experience in banking and a profound knowledge of applicable regulations and processes. This enables financial service providers and institutions to enter the world of digital assets securely. Our clients benefit from the addition of this new asset class in a single stroke, without having to invest in infrastructure and new processes themselves and all this while maintaining the required safety and high security standards.
About Maerki Baumann & Co. AG – Private Bank
Founded in 1932, the Zurich-based private bank Maerki Baumann & Co. AG focuses on its core competencies of investment advisory services and asset management, as well as providing services for independent asset managers. The traditional bank, which is open to modern technologies, is an unlisted family-owned company that takes a long-term view and offers its services from Switzerland only. Its investment philosophy based on independence, security and transparency is reflected in the fact that it refrains from using proprietary products, as well as in its very solid capital base and in the bank’s transparent performance. With its crypto offering and its modular investment approach, the private bank underlines its aim of combining the traditional with the new. Maerki Baumann has assets under management of around CHF 8 billion, of which more than 80 % originated in Switzerland and about 10 % in Germany.
About InCore Bank
InCore Bank is a one-stop business-to-business transaction bank founded in 2007, providing banks, securities dealers and fintech companies first-class transaction banking and outsourcing services. As a Swiss corporation with a banking and securities dealer license, InCore Bank offers a comprehensive and modular range of services covering transaction banking for traditional and digital assets, business process outsourcing and other services. This offering enables other market participants to reduce complexity and focus on their core business.