Neobanks... or cryptobanks?

Sep 12, 2021

Much has been made of the banking revolution that is occurring right in front of us, with the term ‘fintech’ becoming a more consistent part of the mainstream discussion in banking. This shift started happening in retail banking through relatively basic products, including robo advisors, high interest savings accounts, and remittances.

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These products have provided fintechs with a compelling platform upon which to introduce new products to customers, and it is clear that there is a significant belief in many of these trends, including the rise of neobanks, continuing over the coming years. That said, companies participating in the crypto space have started to replicate a similar playbook as they start to secure the mindshare of their customers, often with less friction than their 'traditional' fintech counterparts.

Simple examples include Blockfi’s high yield accounts and credit card, or wealth management services from Coinbase.

And it’s just the beginning.

DeFi and CeFi provide even more opportunity for growth, on a relatively immediate time horizon. Given that there is relatively little friction for users to contend with once they are actively engaged in these ecosystems, the openness to new product introductions is incredible. Early examples such as Yearn Finance (YFI) - optimizing for the best yield on a given asset with a user-friendly experience - don't seem complicated, but can create elegant commercial opportunities, upon which new products and services can be introduced.

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Many participants in the digital asset space are aware of this opportunity - and it could be even bigger than what has been estimated to be in front of fintechs and neobanks as more and more people become comfortable transacting in the digital asset space. In yet another example of this, exchanges such as Kraken and FTX have started to create opportunities for their users to trade DeFi assets and traditional equities, presumably paving the way for a banking revolution that may ultimately have more breadth than even the most innovative pundits can foresee.

Avicenna capital

crypto / fintech / macro research

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