Fintech: Who are the Crypto Neobanks doing $5B in on-chain card volumes?

Here come the new new non-bank banks

Hi Fintech Futurists — 

Today’s agenda below.

1. FINTECH: The rise of crypto neobanks doing $5B in card volumes

2. ANALYSIS: Inside the x402 Startup Gold Rush (link here)

3. CURATED UPDATES: Paytech, Neobanks, Lending, Digital Investing

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Digital Investment & Banking Short Takes

Inside the crypto neobanks doing $5B in on-chain card volumes

Crypto markets have had a rough month.

The total market cap of digital assets is down -22% with BTC dipping -21% from record highs. Total capital deposited throughout the DeFi ecosystem is also down -25%.

The downturn began with the October 10th (10/10) crash as fears of a US and China trade war sparked a mass deleveraging event across exchanges, as traders’ positions got liquidated and market makers pulled liquidity. Confidence further eroded following the $128MM hack of the popular and long-standing decentralized exchange Balancer a few weeks later.

Source

To top it off, yield-bearing stablecoin protocol Stream Finance’s collapsed after reporting a $93M loss in its underlying strategies. Losses spread across associated lending protocols and exposed the excessive leverage and inadequate risk controls still prevalent across the ecosystem.

But regardless of where we are in the cycle, if we zoom out, the direction of travel has been outstandingly positive. Newly established rules and guidelines (e.g. GENIUS act) have enabled incumbents to start acquiring the capabilities to move meaningful capital on-chain and unlock payments efficiencies. This has led to record crypto M&A with volume surpassing $10B last quarter. These deals, which exclude a $2B rumoured acquisition by Mastercard for Zerohash and Coinbase for BVNK, are building the foundations for unified traditional and decentralized finance.

Source

Crypto card payments give us a glimpse into this future, with card volumes reaching nearly $400MM in October or $4.8B annualised. Debit cards issued by crypto platforms like Ether.fi and Gnosis Pay enable users to spend crypto directly from their wallets. Additionally, they provide familiar perks like cashback, savings yield, and instant borrowing against assets via DeFi.

The financial features mirror those offered by traditional consumer banks and fintechs, but leave users fully in control of funds with seemingly above-average rewards. For example, Ether.fi offers an 11% “savings” APY for deposits in its liquidUSD vault. This week, we dig into the rise of these so-called “crypto neobanks”, unpacking the on-chain banking opportunity and assessing moats versus traditional fintechs.

Source

Firstly, let’s break down where most crypto platforms offering cards sit in the payments stack. At a high level:

• Brand: The consumer-facing platform that markets and distributes the card. e.g. RedotPay, MetaMask, Ether.Fi
  

• Program Manager: The regulated core operator managing the card program from compliance (KYC/AML) to custody, FX conversion, and settlements. These often work with liquidity venues like exchanges or market makers.
  e.g. Bridge, Rain, Baanx.
  

• Card Network: Provides global merchant acceptance and transaction routing, enabling users to spend anywhere traditional cards are accepted.
  e.g. Visa and Mastercard
  

• Blockchain: The underlying rails where users hold the crypto assets they wish to spend. These are typically automatically sent to the program manager’s address for processing when a transaction is initiated.
  e.g. Solana, Ethereum, Base, Linea

The majority of the heavy lifting is done by Program Managers who act as the regulated bridge between TradFi and DeFi on behalf of the crypto platform. Rain appears to be a leader in this space, accounting for reportedly over 80% of volumes (as per our earlier chart) and powering most major programs including Ether.Fi, RedotPay, and Avalanche

The company recently raised $58MM from Sapphire Ventures on the back of a 10x growth in volumes, monetized primarily via processing fees. Visa is an exclusive partner to Rain, meaning it has likely been the primary card network for its offering.

Source

The “crypto neobanks” are the card issuers and are in charge of the front-end experience and user distribution. Like neobanks, they typically monetize via a combination of interchange fees and subscription fees. Hong Kong-based payments app Redotpay is the largest, with over $2B in volume from over 5MM users since its launch two years ago. In September, the team raised $45M at a $1B+ valuation.

The value proposition is two-fold.

The first is giving the 716M global crypto holders access to a simple off-ramp into fiat, without the hassle of sending funds to an exchange and subsequently to a bank. Financial institutions have historically limited users’ ability to transfer money in and out of crypto exchanges. In the UK, a recent survey estimated that 40% of crypto investors’ exchange transfers get blocked. Crypto cards provide a straightforward way for these users to spend and send assets.

Source

The second is attractive DeFi opportunities. Since each user controls an on-chain address, platforms can route users to underlying DeFi lending and borrowing protocols to mimic traditional savings and credit products. Technical improvements to blockchains in recent years (e.g. ERC-4337) have resulted in notable UX improvements.

The “vault” model has become particularly popular, where funds are deposited into an actively managed portfolio of underlying on-chain lending strategies. Risk exposure varies, but rates are typically significantly higher than traditional banks and fintechs, ranging between 5-12% APR.

Source: Company data, Blueprint analysis

While RedotPay is currently the largest provider, we believe self-custodial platforms are particularly well-positioned for growth. This is due to (1) an existing user base of crypto holders, and (2) existing DeFi infrastructure and capabilities.

Ether.fi is the case in point. The protocol at its core is a yield platform offering a range of strategies from native re-staking (yield from enforcing cryptoeconomic security) to DeFi lending vaults (yield from on-chain capital markets). It already had $5B in total value locked when launching its payment product Cash in May this year and has since amassed $100M in total card volume. Users can earn 11.2% APY via its LiquidUSD vault up until the point of transaction and instantly borrow stablecoins against BTC and ETH deposits.

Source

We believe crypto wallets are similarly well-positioned due to their proximity to a user’s assets. All users ultimately face off with a wallet to manage assets and connect to the decentralized web.

Platforms like MetaMask and Phantom have monetized their position by aggregating popular primitives like decentralized spot and derivatives trading and distributing them natively within their UI. Wallets hosted around $2.5B in swaps (spot) trading volume in October.

Source

Like neobanks, a wallet’s success is a function of how many assets they hold and how efficiently they cycle them across monetized surfaces. Expanding into adjacent DeFi verticals like card payments, lending, and borrowing enables users to fulfil more of their desired actions without moving assets off platform. Both MetaMask and Phantom have launched card programs this year.

We assume the immediate opportunity for crypto neobanks, therefore, to be the sum of value flowing across these surfaces today, or about $135B in ecosystem TVL. That’s still a fraction of the $212T in retail funds across the traditional banking system, and an even smaller fraction of the $426T when including institutions, private capital, and other sources.

Source

But as adoption of digital assets grows, these platforms may start to realise significant cost advantages compared to traditional players. One early advantage of neobanks over traditional incumbents was that a cloud-native architecture meant they could build digital financial products more efficiently.

Reports estimated the annual operating cost per customer of a neobank in the UK at $25 to $63, compared to over $210 for a traditional bank. It follows that native protocols could likewise package and distribute on-chain products at a fraction of the cost that traditional fintechs will.

Where do they go from here? As more capital moves on-chain, we expect more users will seek out platforms that unify their traditional and decentralised finances. However, the events of the past few weeks have shown us that material improvements to risk controls and transparency are needed for these platforms to become viable alternatives for traditional retail depositors.

The clear rules and guidelines that derisked stablecoins and payments for institutions are still lacking for DeFi vaults and other primitives being packaged by crypto neobanks. We are hopeful that necessary changes are coming.

👑 Related Coverage 👑

Analysis: Mastercard, Visa & Stripe huge push into stablecoin and AI commerce

Analysis: Binance’s Flash Crash Exposes $40B Market Fragility

Fintech 101: Neobanks

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Long Take

We examine early traction for the x402 agentic payments protocol, where roughly 500,000 transactions per day are now flowing, mostly through Coinbase. A growing ecosystem of startups, like PayAI, Dexter, DayDreams, and AurraCloud, are experimenting with x402 integration, though most operate on Solana or Virtuals and trade at small, volatile valuations from $700K–$60MM.

Source

While this creates limited investability for institutional capital, it signals a vibrant, speculative frontier where agentic payments meet consumer automation.

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Curated Updates

Here are the rest of the updates hitting our radar.

Paytech

• ⭐ BlackRock-linked tokenization firm Securitize to go public - CNBC

• Bank of England launches consultation on regulating systemic stablecoins - BoE

• Ripple reaches $40bn valuation following $500m funding round - Fintech Futures

• Airwallex Crosses $1bn Revenue Milestone - Fintech Times

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Neobanks

• Coinbase launches savings accounts in the UK, offering 3.75% interest - The Block

• How Will Payments Change with Revolut’s 1:1 Stablecoin Rate? - Fintech Mag

• Monzo beats Chase and Starling in UK customer satisfaction - Finextra

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Lending

• McKinsey Says Bank Profits Face Possible $170 Billion AI Hit- Bloomberg

• Crypto Lending Climbed to a Record Just as Token Prices Hit Highs - Bloomberg

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Digital Investing

• ⭐ Coinbase launches new platform for early access to digital tokens - Reuters

• Robinhood profit surpasses expectations - Reuters

• Wealthsimple raises C$750m at C$10bn valuation - Finextra

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• Contributors: Lex, Laurence, Matt, Farhad, Daniel, Michiel