Hybrid future: Unleashing the potential of DeFi and neobanking convergence

cointelegraph.com:

As people become accustomed to traditional, online-only banking, crypto innovators are building decentralized solutions that could radically change everyday finance.

A quick Google search of the term “neobank” will bring up the 2007–2009 crisis for a good reason. In the aftermath of the global crisis, entrepreneurs decided that it was possible and viable for startups to build fully online, more advanced and risk-averse financial systems without tethering them to physical locations. What else is special about them?

The new banking paradigms introduced by fintech startups have benefited the general public and made the financial industry less monopolistic and exclusionary. Neobanks have enabled people to open personal accounts with little effort through advances in KYC/AML technology and stronger verification standards.

In addition, online banks often offer all the features of traditional banks, and in many cases, even more, such as low-cost loans, cash back, or international and local transfers.

However, the way neobanks achieve their flexibility is still heavily dependent on the existence of banks with physical locations and core infrastructure. Most neobanks create their products through collaborations and integrations with traditional banks, which makes them lack independence and resilience. 

On a note as important as features or reliance on third parties, neobanks are centralized institutions, just like their counterparts. In today’s financial landscape, where participants increasingly lean toward the idea of distributed, decentralized systems, even the current state of neobanking may not be enough to shape the future of finance.

The use of decentralized finance (DeFi) products and participation in their ecosystems