When DeFi Meets Neo Banking, This Thing Gets Interesting

Varun is co-founder and CEO of Juno, a neo bank that provides users a high yield account for savings.

Even more exciting, DeFi coincides with a broader trend in banking - the rise of fintech and so-called neo banks.

For the uninitiated, neo banks are challenger banks focused on creating a better banking interface using open banking APIs or by building a core banking system from the ground up.

In the last few years, neo banks like N26, Monzo, Marcus and fintech startups like Wealthfront, Betterment, and Robinhood have used this opportunity to attract customers by providing a high yield "Cash account" that pays between 1.5-2.5% APY on deposits through strategic bank partnerships.

DeFi is fintech 2.0.DeFi takes this trend in banking to its culmination by cutting out the middlemen completely, by using open and decentralized peer to peer networks.

DeFi now represents a new fintech wave and DeFi neo banks will play a pivotal role to successfully bridge the gap between fintech and DeFi to attract new customers.

In the last few months, many projects including Juno, Dharma, Linen, Outlet have announced their intention to launch DeFi neo banks built using Compound and Nuo protocol.

Their stated goal is to provide users a high-yield account for savings which competes with cash accounts of fintech startups like Wealthfront and neo banks like Monzo.

As these neo banks attempt to bring new customers, one of the biggest challenges is to provide a competitive high yield at scale.

Lastly, these DeFi neo banks will also need a built in monetization strategy in order to acquire customers and funnel deposits to interest generating protocols.