In this report · 17 sections
Overview
Key takeaways
Neobanks emerged as digital-first alternatives to traditional banking, improving accessibility and user experience while largely relying on existing financial infrastructure.
The rise of blockchain and stablecoins introduced programmable financial infrastructure, enabling faster cross-border transfers, on-chain payments, and access to decentralized financial services.
Web3 neobanks combine familiar banking experiences with blockchain-based services, as illustrated by Mantle UR and MetaMask Card, although regulatory requirements and infrastructure limitations remain important challenges.
Like blockchain technology, neobanks emerged after the 2008 global financial crisis, when trust in traditional banks was deeply shaken and space opened for digital-first challengers. Seventeen years later, both neobanks and blockchain have matured and are now intersecting, giving rise to a new wave of Web3 neobanks that could power a native internet economy for users worldwide. This article explores how Web3 neobanks are becoming a key narrative in today’s crypto landscape.
What is a neobank
A neobank is a banking model that operates entirely on digital platforms, providing a full range of banking services from account opening and identity verification (i.e. KYC) to issuing international bank account numbers (i.e. IBAN), without any need for physical branches. An important detail is that most neobank do not hold their own banking license. Instead, they work with licensed partner banks under a Banking-as-a-Service (BaaS) model. Neobanks concentrate on product and user experience, while the partner bank is responsible for the traditional banking infrastructure.
History of neobank formation
Genesis - Context of origin
Neobanks emerged after the 2008 financial crisis, when trust in traditional banks decreased, and governments were forced to reassess regulations to open financial markets and allow new business models to enter. The United Kingdom and the United States were two pioneering markets that lowered licensing barriers, creating favorable conditions for digital banking models to emerge. In 2015, Europe implemented PSD2, which required banks to open APIs to fintech companies, thereby creating an ideal environment for neobanks to develop.
Between 2010 and 2015, several neobanks emerged in the US and Europe, including Simple, N26, Monzo, Revolut, and Starling Bank. Simple was among the early pioneers of mobile-first banking but struggled to achieve profitability. Meanwhile, N26 and Monzo attracted users through their mobile banking experience, while Revolut focused on foreign exchange and crypto services. Regulatory developments also played a role in the industry's growth. In 2015, the European Union adopted PSD2, which aimed to increase competition by enabling third-party providers to access banking services through APIs.
Scaling Phase (2015–2020) - Explosive growth phase
Venture capital funding flowed into neobanks on a large scale, enabling companies to expand their markets and acquire users quickly. In the United States, Chime broke out with a fee-free model and an easy-to-use app, surpassing 10 million users. In Europe, Revolut became a flagship fintech when it reached a valuation of thirty-three billion dollars despite not yet being profitable. This was a period of explosive growth, when the market believed that digital banks could replace a large share of traditional services.
COVID-19 - Real-world turning point
The pandemic sharply increased demand for digital banking but also exposed the limitations of the neobank model. Most revenue came from interchange fees on card transactions, even though this was a very thin revenue stream, typically only a few dozen basis points per transaction. Even at a significant scale, the total number of transactions is insufficient to cover operating, marketing, compliance, and payment infrastructure costs. This makes it difficult to sustain a revenue structure that relies on card fees. Many institutions tried to expand into subscription revenue, business services, or lending, but the results were uneven, and it was difficult to build stable profit margins.
Some players had to exit certain markets, such as N26 leaving the United States due to costs and regulatory pressure. In contrast, Starling Bank demonstrated sustainability by focusing on lending and became one of the few neobanks that were profitable from 2021.
By 2023, the industry's focus had shifted from user growth to building sustainable financial models. Neobank shifted toward optimising costs, expanding its credit businesses, and seeking traditional partners in order to prepare for a more mature phase.
What is a web3 neobank
In reality, neobanks did not break the existing rails or create an entirely new system. They simply repackaged what already existed on top of traditional banks, making the experience better. When Revolut, Chime, and Monzo appeared, they solved the most obvious pain points of conventional banks. The account-opening journey, which used to take hours of waiting at a branch, filling out many forms, and then an entire week for approval, was reduced to around 5 minutes on a mobile phone. These were real and meaningful improvements. Millions of users have moved from traditional banks to fintech neobanks for these reasons.
However, no matter how smooth the user experience is or how low the fees are, fintech neobanks are still constrained by the very traditional banking infrastructure they rely on. Everything still has to run through ACH or SWIFT, with slow processing times, high costs, a narrow range of financial products, and almost no ability to program cash flows. Web3 neobanks have emerged to address precisely these bottlenecks. Because they are built entirely on-chain, they can operate twenty-four-seven, enable near instant cross-border transfers, integrate yield from open market assets, and deploy transparent, automated financial strategies that are not bound by the infrastructure limitations of traditional banks.
Why are web3 neobanks taking off now
Stablecoins have achieved global product market fit
With more than $ 1.3 trillion in monthly transactions, stablecoins have become the dollar of the internet. To visualise this more clearly, it is helpful to recall PayPal's role in 2005. In the early days of electronic commerce, PayPal was the digital intermediary layer for the United States dollar, helping users send, receive, and pay much faster than through traditional banking systems. The explosive growth of stablecoins shows that this role is now being extended at a completely different scale. Unlike PayPal, which operates in a closed system, stablecoins run on open infrastructure, operate twenty-four seven, move money anywhere in a few seconds, and still allow users to earn yield from sources such as DeFi or T-bills.
When people in Argentina use USDT to escape inflation, or people in Nigeria use stablecoins to send money home, stablecoins are shifting from a purely trading tool to a real financial infrastructure layer.
Regulators have given the green light
Two new regulatory frameworks are reshaping the structure of digital finance.
With MiCA in Europe, this is the first time a primary market has built a comprehensive legal framework for stablecoins. The objective of MiCA is not to tighten or restrict, but to recognise stablecoins as an official component of the financial system, with the right to operate and be supervised like that of licensed digital asset issuers.
In the United States, the GENIUS Act has also been passed and is even more transformative. This act allows applications to hold stablecoins instead of traditional United States dollar deposits, to carry out transfers twenty-four-seven, and to provide payment functions without having to obtain a banking licence under the old model. This opens a new financial infrastructure, where payment and custody services no longer depend on banks' organisational model.
As these two frameworks come into effect, banking activities are shifting from centralised institutions to API based infrastructure. Custody, payments, and compliance are automated through code instead of relying on manual operations in traditional banking systems. This is a fundamental turning point in how financial services are provided and distributed globally.
Infrastructure has matured alongside stable on-chain yield
In this period, most layer one blockchains, such as Solana, and layer 2 networks, such as Base and Arbitrum, have met the requirements for transaction speed and gas fees to ensure a good user experience. In addition, a series of new products has formed around stablecoins and tokenised T-bills. Stablecoins and tokens such as USDY, USDM, sUSD, and OUSG are backed by short-term United States government bonds and bank deposits, allowing users to earn yield almost directly from T-bill interest rates, with typical yields of around 3 to 5 percent per year, paid automatically through rebasing or gradually increasing wallet balances. At the same time, users can earn additional DeFi yield through lending on Aave, Flux, Pendle, and similar platforms to optimize returns, but the core yield layer is still short-term government bonds, not high-risk token farming.
The market is shifting from speculation to consumption
After many cycles, a more structural change is taking place, and users increasingly want crypto that works in everyday life, not just as a trading asset. Crypto is moving out of exchanges and into daily spending, as people can already book flights and hotels or buy coffee with digital assets at thousands of merchants worldwide, including travel platforms like Travala, Norwegian Air and CheapAir. Web3 neobanks are driving this shift by making cross-border transfers faster and cheaper, offering more competitive yields through stablecoins, and expanding access to financial services without geographic restrictions. In 2024, stablecoin transfer volume exceeded $27 trillion, surpassing the combined volumes of Visa and Mastercard. This growth highlights the increasing adoption of blockchain-based infrastructure for payments beyond speculative trading.
Web3 Neobank case
Several established crypto projects are already developing products in this area. Mantle and MetaMask are two examples, integrating stablecoins, on-chain yield, and global payments into Web3 neobank applications designed to offer an experience similar to everyday banking.
Mantle UR
Mantle UR connects CeFi and DeFi through a financial application that allows users to spend, save, and withdraw assets across borders. The platform is backed by Mantle DAO, formerly BitDAO, which holds reserves worth billions of US dollars. Mantle UR offers Swiss multi-currency IBAN accounts supporting USD, EUR, CHF, RMB, and other currencies. Users can also earn MNT through the Rewards Station and transfer USDe and fiat without fees. The service operates under a Swiss fintech licence with FINMA supervision and is backed by reserves on a 1:1 basis. Through its integration with Ethena, users can access an additional annual yield of 5% based on USDe.
MetaMask Card
MetaMask Card marks an essential step for ConsenSys as it introduces a self-custody wallet solution in partnership with Mastercard and Baanx. This product allows users to spend directly from their MetaMask wallet, converting ETH, USDC, USDT, and other assets into fiat in real time. In addition, users can optimise the value of their holdings because MetaMask Card allows them to earn yield from stablecoins with an annual percentage yield of about 4 percent to 8 percent through aUSDC or Aave Boost, or earn further returns from Aave Linea and Coinmunity Rewards.
Conclusion
Both blockchain and neobanks emerged after the 2008 global financial crisis, when trust in traditional financial institutions was deeply shaken. Neobanks improved the banking experience by making financial services faster, cheaper, and more user-friendly. However, most of them still depend on legacy banking rails such as partner banks, card networks, ACH, and SWIFT. Web3 neobanks aim to combine blockchain-based infrastructure with the smooth user experience that made fintech neobanks successful, creating products that feel simple for users while operating on more open and programmable rails, even though the underlying Web3 infrastructure is still maturing. In the long run, Web3 neobanks could become an important bridge between traditional finance and the on-chain economy. Instead of being seen merely as a zero-sum game, crypto may gradually prove its value through real products that can solve real-world financial problems.
Frequently asked questions
What is a neobank?
A neobank is a digital-first banking platform that provides financial services without physical branches, often through licensed partner banks.
How is a Web3 neobank different from a traditional neobank?
A Web3 neobank uses blockchain infrastructure for services such as stablecoin payments, cross-border transfers, and on-chain yield instead of relying entirely on traditional banking rails.
Are Web3 neobanks replacing traditional banks?
Not yet, as Web3 neobanks still face regulatory and infrastructure limitations despite offering more programmable and globally accessible financial services.
