FinTech Is Taking on Retirement With Tontines

Every part of the financial ecosystem is susceptible to disruption, and retirement is no exception. With a global market value hovering around $41 trillion, it’s no wonder that FinTech and blockchain developers are turning their eyes towards transforming this sector. And they may have found their engine for change in “tontines“.

A Different Way to Retire

You’re probably wondering what a tontine is. That’s definitely a fair question. Boiled down, a tontine is a retirement investment pool shared among a group of subscribers. As each subscriber dies, their remaining assets get added to the pool for the surviving pool members instead of familial beneficiaries. These additional assets are known as mortality credits. Investments in tontines are generally treated as irreversible.

But where did this alternative to pensions and annuities come from? Tontines first came to fruition in 1653 in Europe. Sponsored by the government, tontines grew in popularity and were eventually offered by insurers. Redubbed “tontine insurance policies,” they began to get a bad reputation due to their lack of transparency, which made it easy for the insurers to commit fraud and pocket some of the funds. While regulators stepped in to crack down on this dishonest practice, it didn’t stop the concept of tontines from fading away into obscurity.

Bringing Tontines out of Retirement

Fast forward to today: adventurous FinTech and blockchain pioneers now see tontines as a viable alternative for retirement once again. For numerous years, enterprise developers in New York City and other financial capitals of the world stayed away from tontines due to there being no way to re-establish trust in the concept.

Enter blockchain. This technology solves the problem of trust by making transactions trustless. Blockchain technology’s transparent, decentralized recordkeeping makes for a rock-solid audit trail that disables any nefarious activities from misusing the funds.

Tontine Trust is a Gibraltar-based startup banking on blockchain to bring tontines back into style. Members of one of Tontine Trust’s pools will be able to passively invest in diversified portfolios of exchange-traded funds. And with biometric authentication to bolster the blockchain defense, it’s clear that complete transparency and privacy are top priorities.

The Last Link in the Financial Value Chain

Tontines were too ahead of their time when they were first implemented. By combining them with new technologies like blockchain, an elegant solution is borne that could help solve the modern conundrum of retirement. Plenty of FinTech innovations today focus on boosting the bottom line of enterprises, but not enough tackle the truly hard challenges facing society today.

In the last few decades, the concept of retirement has been steadily transforming from an eventuality to a nice-to-have. Perhaps tontines will be the solution to reverse this unfortunate development.