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October 12, 2021

How Can a Stablecoin Infrastructure Help Neobanks and E-Wallets?

Neobanks and e-wallets are transforming financial services with the enhanced convenience, user experience, and accessibility they provide. In addition, they are firing up the competition within the industry by offering new products and services every passing day, accelerating the much needed change in the finance ecosystem.

However, neobanks' and e-wallet companies’ dependency on the traditional financial infrastructure and their banking relationships pose an obvious obstacle to their potential. In fact, nothing traditional can be compatible with the technology and novelty these companies can further offer.

Nevertheless, developments in stablecoins are showing progress in the meantime. Since stablecoins’ value is tied to stable assets, such as fiat money or gold, they are more capable of serving as a means of payment and finance management. Moreover, they promise vast opportunities for both neobanks and e-wallets by enabling them to get freed from their dependency on the traditional infrastructure.

Here are some of the most important benefits stablecoins can provide for neobanks and e-wallets:

  • They operate 24/7 with 100% transparency: They are independent of the time limitations of the current financial system, such as holidays and banking hours. Just like other cryptocurrencies, they are always available and provide complete transparency, which is fully suitable for neobanks and e-wallets.
  • They allow low-cost transactions: Since stablecoins eliminate the need for intermediaries that add up costs to money transfers and other transactions, they make all transactions much more affordable.
  • They enable a much better UX: Neobanks and e-wallets mainly differentiate themselves from the traditional players by the outstanding experience they provide. Stablecoin infrastructures can also help them enhance the UX, as they provide much more control over the user experience by bringing along new types of automation and treasury designs.
  • They allow low-cost lending with high yields: One of the biggest problems neobanks and e-wallets have today is that they can’t offer interest-bearing products, which leaves them in need to come up with other perks to attract deposits, like cashbacks. Stablecoins can act as gateways to global, low-cost lending with high yields through DeFi liquidity pools they access, providing a massive opportunity.

Stablecoins offer all the advantages of cryptocurrencies without the downside of extreme volatility; they are low-cost, borderless, fast, and available 24/7. However, the difficulty in on and off-ramp, from and to fiat currencies are the biggest problems with stablecoins that need to be solved.

Regulatory uncertainty regarding stablecoins also continues to be a significant issue across the world. However, governments are increasingly focusing on stablecoin tests, indicating a legitimate intention at the state level to bring stablecoins into mainstream use. Although they remain largely untested, and the progress is much slower than ideal, it is getting better thanks to attested stablecoins like USDC.

There is no doubt that all digital money will be stored on the blockchain in the near future. Stablecoins, as digital currencies minted on the blockchain, are fully compliant with the digital era’s requirements. It is the perfect complementary technology that will help neobanks and e-wallets thrive, transform the monetary system into a more efficient and inclusive one, and improve the daily lives of the digital world’s residents.

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