In the era of digital transformation, where fintech apps, neobanks, and various industries are rapidly evolving, many players in the bullion market have embraced digitalization through webshops and related services. However, certain new firms that offer tokenized gold lack crucial elements such as regional branding, organizational responsibility, physical stock management, existing offices, and auditable transparency. Essentially, these players lack trust, infrastructure, and high-quality services. It is clear that gold dealers must keep up with market development and modernization to meet the growing customer demand.
“As dealers experience these dynamics of development, they are considering the introduction of digital transformation and replatforming. The backbone of this transformation is IT, which is generally complex, expensive, and challenging, requiring long-term commitment and substantial investment. To avoid this arduous journey, we have created Vaulter,” explained Sophie Mercier, Chief Sales Officer at Vaulter.
Vaulter is a white-label platform designed for retail gold dealers to offer online services to their customers. It enables day-and-night buy/sell transactions of precious metals in any size, offers precious metals accounts, allocated and pool-allocated vaulting at accredited locations, facilitates the transformation of metal balances into bars and coins, provides VAT-free silver and platinum, saving programs, real-time lending, market forecasts, and more.
The key advantage of using Vaulter for gold dealers is the opportunity to grow and expand without the need for complex, challenging, and expensive IT development. Moreover, since Vaulter is a Software-as-a-Service (SaaS) solution with an unmatched subscription pricing model, there is no long-term commitment or substantial investment required to introduce online services. This guaranteed profitable pricing model allows even the smallest gold dealers to easily adopt Vaulter and start offering modern services to accelerate their business and keep up with the evolving digital transformation of the bullion market. With this subscription-based pricing model, the operational cost will always be lower than the income generated from trade markups and fees.
Trust is a fundamental cornerstone of the bullion market. Vaulted bars, which represent precious metals balances, are clearly identifiable with a serial number and manufacturer. They are allocated to individual investors or groups of investors. This means that each customer can monitor in real time the percentage they own of a specific bar, where it is stored, and who the manufacturer is. If a dealer has multiple vaulting locations for a particular metal, customers can choose their preferred location, and the operator strives to fulfill their request for a fee. This service allows customers to manage their location preferences as well as their geopolitical risks and concerns. Allocated bullion is held as the customer’s property in explicit physical form and is not used to support lending programs or other financial devices. It is kept separate from the company’s balance sheets under a safekeeping or custody program, ensuring that it cannot be accessed by a liquidator in the event of company failure. Since customers are the owners and not creditors, allocated metal is the only form that can establish trust among customers due to its high level of protection.
During a purchase or sale, the customer’s overall balance, represented by their rights claim, is immediately handled by the Hedge Manager to mitigate rate risks. If the bullion coverage is incomplete or exceeds the required amount, the mismatch is hedged on the foreign exchange (FX) market. Unlike stock exchanges where orders are directly linked to specific positions, the execution of opening a position in bullion trading is not order-driven. This is because the asset behind a successfully executed order is typically part of a vaulted bullion. Therefore, the Hedge Manager calculates the metal position based on the balance of claims, vaulted bars, and current net open position and acts independently when necessary, regardless of any specific event or execution. This principle ensures the continuous maintenance of customers’ rights claims and metal coverage, with both sides strictly and equally expressed in net value.
Hedging may result in a temporary unallocation of a small portion of customers’ assets until the operator covers the mismatch. However, by monitoring incoming bank transfers, the operator can anticipate metal purchases and buy bullions in advance. These purchases are offset on the FX platform to eliminate rate risks associated with any surplus in precious metals.
The Hedge Manager handles every aspect of metal trading, while Vaulter can also manage currency accounts for customers to conduct transactions using their preferred currency, typically their domestic currency. Foreign currency hedging is similar to metal hedging, with the main difference being that the customers’ balances are bank accounts with probable FX positions rather than bullions. These FX positions ensure precise settlement, as the value of every precious metals transaction is automatically tracked in the foreign exchange market. The choice of accounting, performance measures, and other metrics expressed in the selected settlement currency is usually determined by the location of the dealer’s headquarters. The Hedge Manager closes FX positions when a treasury transaction is successfully executed in the dealer’s bank accounts. This eliminates the need to maintain foreign currency positions as the deliverable currency balance becomes available. This process is similar to managing bullion stock, where a wholesaler purchase closes an FX metal position.
“Purchasing, selling, and vaulting gold and other metals is just the beginning of the journey towards digital transformation. Once a dealer reaches at least 5,000 customers, it becomes worthwhile to consider introducing a mobile app. An offline dealer with an integrated online purchasing, vaulting, and home delivery service, complemented by a smartphone app, would offer a complete and unparalleled service on a global scale,” added Mercier.