Crypto Must Evade Neobank Economics to Thrive

Crypto Must Evade Neobank Economics to Thrive | Opinion

As the cryptocurrency sector evolves, it faces challenges similar to those encountered by neobanks. While these digital banks have modernized consumer finance with user-friendly interfaces and fee-free transactions, most remain unprofitable. This article argues that crypto platforms must avoid replicating the neobank model, focusing instead on developing robust financial ecosystems that integrate payments, assets, and on-chain finance.

Key Takeaways

Neobanks have transformed consumer finance but struggle with profitability; 76% are unprofitable.
Crypto payment apps are at risk of adopting a similar unsustainable model.
Payments should be seen as a means to acquire users, not the core business.
Sustainable revenue in crypto comes from on-chain finance activities rather than transaction fees.
Zero-fee cards signal a strategy focused on user acquisition rather than profitability.

Crypto does not need to be another digital neobank; it needs wallets and platforms where payments, assets, and on-chain finance reinforce one another

Payments Alone Won't Sustain a Business

Neobanks have been founded on card economics, primarily relying on interchange fees, which are the charges that merchants' banks pay to issuers for each card transaction. However, in major markets, this revenue stream is limited. In the U.S., for example, Regulation II caps debit interchange fees for large issuers at $0.21 plus 0.05% of the transaction, while in the EU it is capped at 0.2% for debit and 0.3% for credit cards.

Due to these limitations, many neobanks face challenges funding rewards programs, appealing applications, and ongoing marketing efforts. When customers spend less, their fee income decreases; when regulations become stricter, profit margins suffer further. Some prominent neobanks have only achieved profitability after significant time in the market and shifts into lending and fee-based services. Therefore, while inexpensive payments can attract customers, they should not form the foundation of a business.

Stablecoins Compress Margins Further

To complicate matters, stablecoins are adding more pressure to an already fragile business model. They facilitate nearly instantaneous settlements with clear on-chain pricing and minimal foreign exchange (FX) friction. In 2024, international stablecoin transactions reached around $2 trillion, particularly thriving in areas where traditional cross-border payment methods are slow and costly.

As stablecoins gain traction through initiatives from networks like Visa and integrations with consumer platforms like Zelle, users quickly realize that near-zero spreads are attainable. This reality makes it increasingly difficult for any crypto neobank to explain high FX margins or ambiguous charges on card transactions. Ironically, the technological advancements that enhance user experiences also diminish the revenue streams that sustained earlier neobanks.

Card-based crypto offerings also inherit the disadvantages of both worlds. They need to enforce Know Your Customer (KYC) rules, monitor fraud, and manage chargeback processes that comply with global card schemes while simultaneously funding blockchain infrastructure, wallet security, and custody arrangements. Rather than replacing traditional costs, many crypto cards merely add blockchain expenses atop existing card obligations.

Cards Should Serve as Distribution Channels

The uncomfortable but essential conclusion for the crypto sector is that making payments the central focus is a futile approach. A more sustainable strategy involves viewing cards and day-to-day transactions as distribution tools aimed at user acquisition and retention. Therefore, true value creation should occur in the higher-margin realm of on-chain finance.

Some digital banks have already demonstrated this strategy within the fiat space. Their revenue growth stemmed not from interchange fees but from lending, trading, and investment products that resemble brokerage services rather than basic checking accounts. Crypto platforms, however, have an even broader range of possibilities. Activities like on-chain swaps, structured yield opportunities, access to tokenized real-world assets, and curated portfolios can generate far healthier revenue streams than mere card swipes.

In this model, the wallet or card should not be viewed as “the product.” Instead, it serves as an entry point into a more extensive stack of financial services—the gateway where users initially engage, not where the business model concludes.

Zero-Fee Cards Signal a Different Strategy

Zero-fee or cashback-heavy crypto cards should not be mistaken for signs that payment processes have suddenly become profitable. More commonly, they indicate a strategy focused on monetizing user actions that occur following the first transaction.

A wallet that offers refunds on FX markups and limits spreads is essentially relinquishing revenue that originated during the neobank era. The expectation is that once users become comfortable spending stablecoins at retail locations, they will also engage in trading, staking, allocating to real-world assets, or using embedded yield tools within the same application. The economy of this approach relies on routing, spreads, and performance fees from these higher-value activities, rather than from the interchange rebate associated with a simple purchase.

When viewed from this perspective, a zero-fee card acts more like an acquisition tool than a profit generator. It resembles a retail loss leader while being deeply integrated into on-chain finance.

Crypto's Opportunity to Break Free from Neobank Models

The overarching stablecoin narrative emphasizes the critical need for this shift in thinking. Annual stablecoin volumes are now in the trillions, and conventional institutions are no longer spectators; a significant number of major banks are already testing stablecoins for cross-border payments and liquidity management. Stablecoins and USDC are gradually infiltrating retail payments, merchant acquiring, and remittances, frequently offering services at lower costs compared to traditional card fees.

If crypto-based applications respond by reconstructing the neobank model using tokens, the result is predictable: years of user growth followed by severe margin reductions and industry consolidation. A more ambitious approach involves recognizing that payments are merely infrastructure and developing business models that capitalize on the higher-value aspects enabled by programmable money.

Crypto does not need another wave of low-margin digital banks. It requires wallets and platforms where payments, assets, and on-chain finance mutually enhance one another, with cards and stablecoins functioning as the entrance rather than the entirety of the offering.