Crypto neobanks are getting popular.
More than half a dozen of this new breed of financial apps have launched over the past year, banking on clearer regulations and the technological savvy of younger generations to fuel their success.
“The majority of investors today are digital natives,” Zac Prince, managing director of GalaxyOne, Galaxy’s crypto neobank, told DL News. “They’re comfortable with app-based banking and want a single, modern platform that removes friction and gives them full visibility.”
The popularity of these new blockchain-powered apps comes at a key moment for the crypto industry. Having long been watched with suspicion by traditional finance and regulators, new pro-industry policies have paved the way for crypto to tap into traditional finance, and vice-versa.
Crypto neobanks have everything to play for. If they can carve out even a modest slice of the traditional banking market, the rewards will be huge.
The global banking industry is massive, with revenues hitting a record $5.5 trillion last year. The sector is estimated to be worth $3.9 trillion in 2025, according to a report from global management consulting firm McKinsey.
What are neobanks?
Neobank is the nom de guerre of a new breed of digital-only financial apps that burst onto the scene over the past decade.
Chime, Revolut and Monzo challenged traditional banks by ditching brick-and-mortar branches, enabling them to cut costs and offer higher interest rates than incumbents.
Neobanks have thrived. Revolut is now one of the most valuable fintech firms in Europe, having achieved a $75 billion valuation at a secondary share sale to employees and investors in September.
Crypto neobanks are the latest evolution in the trend. They aim to leverage blockchain technology in their products to offer fast, low-cost international payments, easy crypto investing, and double-digit interest rates on deposits.
To be sure, they are facing fierce competition. Older challenger banks are also tapping into similar services while crypto-native firms roll out their own banking services.
Tapping DeFi yields
For many crypto neobanks, the focus is on offering customers better returns than they can find in the traditional banking system.
“Interest rates are crazy low,” Vijit Katta, CEO and co-founder of Tria, a crypto neobank, told DL News. “Unless you go for financial products which are risky, you won’t be able to get more than like, 10% ever.”
Tria plans to tap into yields offered by decentralised finance protocols, which can go toe-to-toe with the best rates offered by other neobanks.
