How to operate Cyclos 4 for a start-up bank?

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martumbafarm
Posts: 1
Joined: Wed Feb 25, 2015 8:41 am

How to operate Cyclos 4 for a start-up bank?

Post by martumbafarm » Wed Feb 25, 2015 11:41 am

We are requiring aid in the setting up of an online banking operation. Is there someone in the Forum already carrying on a banking business who can assist in giving direction in this area?

Cybernomix
Posts: 6
Joined: Wed Feb 25, 2015 11:49 am

Re: How to operate Cyclos 4 for a start-up bank?

Post by Cybernomix » Wed Feb 25, 2015 12:14 pm

I'm a future PhD candidate in Financial economics, with 2y experience in private equity.
If you are more specific as to what aspect of banking you need guidance for, I would be better able to answer that.

Needless to say, it is not impossible but it would be very very different from your traditional bank / e-bank.

For example, the core business of a consumer and/or commercial bank - ie the majority of profits and revenue - come from interest on loans. This is because for every 1 unit of deposit, they can lend up to 96 - 99% of that. That loan then becomes another bank's deposit and is immediately lent out again, returning to you as a deposit for you to then relend. This process is known as fractional reserve banking and allows banks to - in the long run - lend multiples of what they owe. E.g. At 5% interest per loan they can earn above 300% to 400% of their deposit amounts, in interest alone.

Unfortunately, fractional reserve banking cannot happen with only one bank. I can tell you right off the bat, you will never be profitable with lending as your core business. You will have to offer multiple alternative financial services to be profitable, and that's assuming the laws of your region allow banks to do that (can't in the u.s. or Canada).

I would highly recommend you work with a team of financiers and at least one economist.

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