Could Neobanking Be The Financial Bridge for Fiat and Crypto?

Blockchain, News, Opinion | February 17, 2022 By:

The future of finance is changing and neobanking is at the epicenter of fintech innovation. Both crypto and neobanking have been on the rise over recent years, disrupting traditional finance channels. Crypto continues to struggle to gain traction over fiat currency, though. Neobanking may be the ideal meeting ground for crypto and fiat by introducing people to cryptocurrencies and offering a platform that is compatible with both. 

What is Neobanking?

Neobanks, also referred to as “challenger banks”, are digital-first fintech startups that are not actual, chartered banking institutions. These innovative companies generally have low or nonexistent service fees and tend to offer a high-quality online experience that gives them an edge over traditional banks. It is important to note, however, that neobanks are not the same as online banking platforms, which are connected to a chartered bank. 

Neobanks are often known for their accessibility and flexibility, which has helped to draw in customers in a competitive market. For example, many neobanks are more relaxed about credit requirements. This allows them to serve an entire market segment, those with poor credit history, without much competition from traditional banks. 

Interestingly, neobanks typically have no physical location, at least not one that customers can go to. They operate completely online, often through a smartphone app. This enables neobanks to be more agile than traditional banks when it comes to innovating and adapting to new technologies, such as crypto. 

Neobanking and Crypto Adoption

So, what makes neobanks an ideal bridge between fiat currencies and cryptocurrencies? Neobanks primarily work with fiat currencies because those are the currencies that most people continue to use. If neobanks want to compete with chartered banks, they need to offer support for fiat currencies. 

Meanwhile, cryptocurrencies have largely found their home on crypto-specific “wallets”, such as Coinbase or Electrum. This niche accessibility may be contributing to the slow growth of crypto as mainstream currencies. People simply don’t know where they can do their crypto banking or may be wary of diving into the crypto world. 

Neobanks are uniquely positioned to dramatically increase the growth of crypto by putting it on the same platform as fiat. Since neobanking customers are already used to doing all of their banking digitally, they may be more open to investing in crypto. After all, if a customer is using a digital bank, why not try a digital currency? This is especially true considering that crypto would be so accessible on neobanking platforms. Users could see their fiat wallet and crypto wallet in one convenient place and manage both easily. 

Digital-First Finance for All Currencies

Neobanks already have the infrastructure to bring crypto into the fold. Many financial institutions had to pivot operations during the COVID-19 pandemic, switching to remote work. One of the number one tips for success for digital teams in finance is to establish effective electronic workflows. In the digital world, financial institutions have to be able to operate efficiently and effectively even while 100% remote. In the wake of COVID-19, it has become clear that this digital-first world is here to stay. 

Neobanks have been operating fully virtually from the start, and have years of experience already working on a digital-first platform. In many ways, neobanking is the perfect match for crypto – digital-first banking for digital-first currency. Neobanks adopting crypto could become a self-fulfilling prophecy, as well. Industry experts have pointed out that fintech companies remain reluctant to invest in crypto, largely because of limited customer demand. 

If neobanks were to open their doors to cryptocurrencies, millions of people could easily access both fiat and crypto currencies. This would likely lead to a noticeable increase in crypto investment and, as a result, an increase in demand for more crypto support throughout the fintech industry. 

Crypto could very well be the future of finance, so financial institutions that work to bridge fiat and crypto will gain some future proofing. Neobanks already have a cutting-edge reputation. Investing in crypto could be extremely valuable for retaining that brand, and retaining customers, as crypto becomes more popular. 

Fueling the Future of Finance

Finance is in a state of thrilling innovation and transformation. Over the last decade, cryptocurrencies have risen from obscurity to become some of the most hotly discussed investment opportunities out there. Crypto has trended on social media, shaken up the stock market, and gained vocal support from countless celebrities and industry leaders. 

Neobanks are uniquely positioned to take crypto to the next level by bridging the gap between crypto and fiat currencies. By bringing fiat and crypto together, neobanks can spark mainstream crypto adoption, putting them at the forefront of the future of finance.