ORO Bank launched its minimum viable product (MVP) on May 24 as the official bank of Bhutan’s Gelephu Mindfulness City.
The city is a Special Administrative Region planned in the southern part of the kingdom that emphasises equitable economic growth, cultural preservation, environmental sustainability and good governance – values listed out in the south Asian country’s philosophy of Gross National Happiness.
Unlike traditional commercial banks which hold a fraction of depositors’ funds in reserve and lend out the others to generate yields, ORO Bank features being ‘full reserve’, meaning that it won’t lend out or issue credits, offering full liquidity of its customers’ deposits at any given time, available for immediate withdrawal.
Mike Kayamori, chief executive officer at ORO Bank, argued to FinanceAsia that the newly established digital bank is aiming to share the same value with Bhutan’s mindfulness city, providing “happy and safe” banking products. He cited the bankruptcy of Silicon Valley Bank last year due to a bank run, saying that despite being capital inefficient, a full reserve model could help avoid such scenarios.
Business model
Similar to other traditional banks, ORO Bank holds a view to offer a suite of products including deposits, savings, foreign exchange (FX), cross-border payments and investment.
FX conversion fees, transaction fees and payment fees will be the main source of revenue for ORO Bank, Kayamori explained.
In the future, he anticipates the integration of yield-generating savings accounts and investment products to the system, offering customers the voluntary option to lock in their funds for yields, through which the bank charges small fees.
Despite being based in Bhutan, Kayamori said the bank will target citizens and global customers in the city of Gelephu, as well as global start-ups and entrepreneurs who want a different model for deposits.
“We target start-ups in emerging tech, those who, from day one, have the needs to pay global vendors and suppliers and with a global customer base,” he added.
At this stage, a depositary service is provided in US dollars, Euros, pounds (sterling) and Singapore dollars. Kayamori told FA that the team is expecting to add Australian dollars, Hong Kong dollar sand Japanese yen to the suite, in the near future.
Registration of new users is currently only open to Singaporean residents, as a result of different regulatory processes over offshore banking. Regions like mainland China, which exerts strict capital control and restrictions over cross-border transfers, will be excluded.
Fully digital
ORO Bank is also fully digital. The establishment of the bank was carried out in partnership with Finastra, UK-headquartered financial software company.
Compared to traditional banks’ digitalisation efforts, John Guest, managing director of universal banking at Finastra Asia Pacific, told FA that the process was much easier building up functions ‘on a fresh page’.
“A traditional bank usually has a lot of legacy technology architecture and products, which can take them a long time to overhaul. But if you’re starting a new digital bank now, [the] time to market is a lot faster,” he said.
Legacy systems and data scattered across the organisation can sometimes be a headache for large international banks when they look at digitalisation. There are certain products that could not afford being suspended for upgrading. The aggregation of data stored across business segments and markets oftens has compatibility and regulatory issues.
The team managed to launch ORO Bank within six months of preparation phase. Guest said that through the modular architecture provided by Finastra, the system would be flexible enough to support rapid developments, such as adding in new capabilities with relatively low efforts.
Siobhan Byron, executive vice president of universal banking at Finastra, commented in a June 4 press release: “This is a bank that thrives in bringing innovators and entrepreneurs around the world together to collaborate – a reflection of the same open finance ideals we hold at Finastra.”
Kayamori emphasised that ORO Bank is designed for digital-savvy people across the globe, including entrepreneurs in the tech industry who want a high level of security in their early stages of business.
San Juan-based Euro Pacific Bank and Zenus Bank are two examples of full reserve banks outside of Asia. The former, established by US stockbroker Peter Schiff, suspended trading and operations on June 30, 2022, due to an investigation into suspected tax evasion and money laundering, which ended up being liquidated by regulators.
