It’s hard to imagine the modern world without instant money transfer apps, investment apps, and digital wallets, enabling users to pay online and at marketplaces. Users don't care much about how these transactions are performed as long as they are seemingly safe, instant, and don’t take much of the learning curve of how to use an app. 

All these became possible because the niche of innovative banking experience is occupied by neobanks, which operate on top of existing financial infrastructure. Being a wrapper for the traditional banking experience, neobanks share similar strategies and ways of industry development. One of the recent tendencies existing among banks and other financial institutions is embracing crypto. 

Based on recent research, more than half of the top 50 world banks have already started working with crypto. Bank of America, JPMorgan, HSBC, Wells Fargo, Goldman Sachs Group, just to name a few.  

Of course, such financial giants have all the capabilities to build their private blockchains specifically designed for the needs of the institution, rather than being stuck with existing blockchain infrastructure. But it’s obvious that they refocused and are genuinely interested in blockchain and its benefits. 

Due to neobanks’ flexibility and eagerness to experiment, their interaction with web3 is brighter and more in-depth. Let’s discuss why neobanks should create crypto wallet apps and use blockchain. 

Neobanks are in Avantgarde of FinTech Banking Transformation

Neobanks are well-known for disrupting traditional banking through innovative technologies. Their distinct features are a user-centric approach and appealing UI. The term ‘neobank’ was coined around 2016 and since that time the overall number of neobanks has exceeded 400. The majority of them are feature-rich and profitable. 

Unlike traditional banking institutions, there is no need for physical contact with the branch of the bank while setting up an account. One can access neobanks through mobile phones or websites, they don’t have a physical office. Neobanks are appealing to users because they are flexible, user-friendly, and offer various benefits. 

At the same time, the sky’s the limit and if there are new disrupting technologies that could be beneficial for users, neobanks are ready to plunge. One of such technologies is blockchain. 

Some of the prominent neobanks have already enabled crypto transactions through the creation of their own crypto wallets. Paypal, Square, and Revolut are one of them. Let’s discuss the reasons for it.

Why Do Neobanks and Banks Move toward Crypto? 

• One of the reasons is new revenue streams added to traditional ones. By providing access to cryptocurrency exchanges, neobanks increase customers’ chances to generate extra money on buying and selling crypto.
• Attracting new customers is another reason. There is no doubt that the number of crypto users is growing. That's why adding crypto helps a neobank stand out and be competitive by embracing more users.
• Retaining current customers. When a neobank embraces crypto, it makes its customers’ lives easier. Now there is no need for a separate app for crypto payments and transactions. For example, PayPal claimed that after they launched their crypto trading platform, the amount of logins into the app increased twofold. 

Blockchain Technology in a Nutshell

Blockchain technology was introduced in the 2000s with the launch of the Bitcoin blockchain. It's a decentralized immutable ledger where all transactions are written and stored indefinitely. Each transaction that is performed through a crypto wallet is written in the block. The block has to be validated and then added to the blockchain permanently. 

The blockchain network is designed based on high-profile mathematics and top-notch cryptography practices, which makes any alterations of blockchain blocks infeasible. 

Everyone who has a crypto wallet, which is the gate to web3, can view all transaction history of the blockchain since the moment of its creation.

In the beginning, there was only one blockchain and now the variety of web3 ecosystem is presented by more than 1000 chains delivering various decentralized services.

What are the Benefits of Blockchain for Banks and Neobanks?

• Security, Immutability, and Transparency

Blockchain technology helps financial institutions and neobanks to eliminate intermediaries. Also, in a situation when there is zero trust environment the more protected cryptography is, the better. There is not a single activity in blockchain that doesn’t involve cryptography, but from wallet to wallet encryption implementation differs. 

The immutability of the distributed ledger and the high level of user protection helps companies build trust with their clients. Moreover, all transactions are transparent and anyone can see, monitor, and audit them. It means that there is less space for fraud. 

• Simplified International Payments

In the world of web2, there are no straight ways to make a transaction. If we talk about international payments, a dozen intermediaries are required. Moreover, they are expensive and time-consuming. Blockchain has the potential to change it. 

Direct peer-to-peer transactions are available on blockchain, cost-effectively and instantly. Streamlining international transfers and making them secure and instant is a good point in making users loyal and satisfied. 

• Cutting-Edge Identity Verification

One of the negative sides of traditional financing institutions' practices is the fact that they have to repeatedly perform identity verification on their customers, for security reasons. Blockchain-powered identity software could facilitate verification processes and give users full control over their personal information, minimizing any data breaches. 

Also, if several banks and other financial institutions are operating in web3, even if not on the same blockchain, there is a possibility to facilitate the sharing of customer’s data in a safe way, speeding up various banking operations.  

• Precise Scoring and Improved Lending Practices

Two main properties of blockchain are revolutionizing the lending processes. These are transparency and immutability. Banks and neobanks can access decentralized customers’ financial records, which paves the way to instant and precise score evaluations. Smart contracts are a valuable asset to lending practices because they are capable of loan agreement automation. 

Spatium Helps Banks and Neobanks Create Crypto Wallet Apps 

Seamless Wallet Deployment

Spatium wallet development infrastructure consists of two main components: Wallet SDK and Wallet Cloud. These two core elements are efficiently and easily used to create crypto wallet apps. A skilled team can integrate Wallet SDK in less than a month. Just after that, blockchain security and convenience could finally meet traditional banking experience, making funds transfer frictionless and instant. 

Security and Protection

Crypto-banking solutions on average provide an impressively higher security level than any other Fintech apps. Wallet SDK comes with multi-layered cryptographic and MPC key and wallet management, which makes wallets unhackable and eliminates unauthorized access and digital asset theft. 

Reporting and Transaction Monitoring

The wallet infrastructure features three transaction signing parties. One of them is a user, who always initiates the transaction. The second one is a service provider and the third one is Spatium. If requested, Wallet SDK can enable programmable signing, which helps the service provider comply with KYC and AML requirements.

To Sum Up

Spatium’s experience and deep understanding of how blockchain technologies work provide an extra secure and increasingly fast way for banks and neobanks to take an idea that is just a project to production. In a very short period, backed up by Wallet as a Service SDK, banks and neobanks can create crypto wallet apps and let their customers reap the benefits of web3.  

A powerful argument for partnering with us is the fact that the wallets developed on top of Wallet SDK are non-custodial, which means that they don’t require any licenses to operate. One more plus is facilitated onboarding and the extremely user-friendly interface of the wallet, in addition to the fact that users have total control over the funds. Let your customers enjoy using protected, feature-rich MPC wallets while you save on development and design. 

Eager to get to know more about Wallet as a Service platform, let us know. Our sales representatives get back to you and pick up a convenient time for a call.

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