Millions of people (representing billions of dollars of value) want to keep most of their net worth and financial activity on crypto rails. However, this is currently very difficult due to limited crypto payment options (e.g. subscriptions, direct debit, bank transfers), and poor UX of current bridging solutions (most banks don’t integrate crypto rails and vice versa for wallets).We believe there’s an opportunity in building bridging solutions that allow users to seamlessly manage and move between crypto and fiat. The way we imagine this product is as a multi-currency fiat account (similar to Revolut), which also includes crypto wallets (with both custodial and non-custodial options), making it easy for users to manage their entire financial life in one place. This should also include IBANs/acc numbers to facilitate bank transfers/direct debits, as well as a debit card for seamless payments in both stablecoins and fiat.
In addition to matching the functionality of current neobanks while integrating crypto, we believe a crypto-native neobank also possesses several inherent advantages it could capitalise on. Here are a few examples, inspired by Multicoin’s excellent blog on the subject:
- Interest accounts: A crypto-native neobank can integrate with on-chain sources of yield such as money markets and/or staking. The real-time yield provided by these protocols can also act as a powerful psychological incentive for new customers.
- Bi-directional payment flows: Just as the internet brought bi-directional data flow to a world that was previously one-directional (radio, TV), crypto enables bi-directional value flow to an extent that was previously impossible. We’ve seen this used to great effect in myriad “x-to-earn” schemes, as well as to bootstrap physical networks like Helium. A crypto-native neobank should enable users to take advantage of these capabilities:
- X-to-earn: Right now, businesses pay ad networks to drive traffic (impressions and clicks) to their properties. However, it’s currently not possible to route their attention to specific actions. Protocols such as Rabbithole on Ethereum offer protocols the ability to reward users for specific on-chain actions, simultaneously allowing users to get paid to learn about new projects. The winning crypto-native neobank can combine rich off and on-chain data to allow users to opt-in to being targeted for such opportunities, simultaneously giving protocols much more granularity in the type of users they target.
- Referral marketing: Currently e-commerce stores provide referrals via coupons because this is much easier than facilitating a large amount of cash pay-outs. As evidenced by the success of CEX/DEX exchange referral campaigns, providing referrers with cash is likely to be far more effective. A crypto-native neobank could facilitate this.
- International payroll: Anyone who has setup international payroll will know how complex this process is. Crypto has several advantages in this area, and a crypto-native neobank could provide easy solutions for businesses to conduct payroll and for employees to seamlessly bridge on/off crypto rails. Leveraging payment streaming, users could also be paid continuously, and/or be paid in interest bearing tokens.
- Crypto-native payments: While payments is a massive vertical and the solutions there are highly competitive, we believe there’s opportunity for the neobank to differentiate on particular kinds of payments that crypto can uniquely facilitate:
- High-risk payments: Certain kinds of payments face much higher chargeback rates. These include fungible token payments, adult content, and online gaming. OnlyFans charges creators 20%, and pays out 12-13% to payment processors. Gaming payment processors charge 5-15% per transaction, and Steam charges 30%. Many payment processors also impose 30-day payout delays to mitigate chargeback risks. As Bezos would say: “your margin is my opportunity”. Replacing these payments with crypto rails can dramatically reduce costs, and projects like Beamo are already offering credit card and multi-chain payments at 1%.
- On-chain payments: The winning crypto-enabled neobank should also become the standard payment method for on-chain products and services, including NFTs, subscriptions, and potentially ICOs.
- P2P Payments: Seamless P2P payments haven’t been nailed yet, with most crypto people still settling IRL debts via Venmo and other methods. We believe there’s the opportunity to build something better here. The winning solution should provide excellent UX such as an address-book integrated w/ Web 2 identity (email/phone number) and the ability to send stablecoins across various chains. In addition, crypto-specific features could be built such as the ability to hold all your assets in a given asset-mix and send stablecoins without actually owning them, with the platform automatically converting the appropriate amount of each asset into stablecoins and sending them. The same thing could be built for receiving payments, where the platform would automatically convert stablecoins into the user’s chosen asset mix.
Where: This should be chain-agnostic but integrate with major sources of yield such as Mars
Hackathon MVP: Given the range of possible features that the product could specialise in, it’s difficult to define a single hackathon MVP. It’s also worth noting that building a neobank is a regulatory/operational challenge as much as a technical one, and the right team should either have some experience in this area.Mentor: Bitcoin Sage (Delphi Labs product lead)