Deobanks: DeFi To Go Mainstream Through On-Chain Banking

Neobanks once promised a revolution: they were supposed to simplify finance and make it accessible, onboarding those left out by traditional banks. However, over the years, the centralization of neobanks and their reliance on legacy systems have limited their impact. 

The evolution continues with Deobank — a decentralized on-chain bank that puts neobanks' sleek mobile-first design on blockchain rails. Paperless KYC, instant global payments, and protected self-storage of funds become available to all, making a leap in financial inclusion. 

From Neobanks to DeFi

When neobanks came around, it was a breath of fresh air. Legacy banks with their crowded offices, cumbersome money transfers, and paper documentation became a thing of the past. Novel solutions like Revolut and Chime disrupted the market: they got rid of physical branches and introduced user-friendly apps with real-time analytics. 

The digital transformation was moving full steam ahead; still, neobanks couldn't move away from traditional banking infrastructure, leaving its core challenges unresolved.  

1.4 billion people worldwide remain unbanked. About 29% of the population in developing countries doesn't have a bank account — mainly due to the lack of money, distance to the nearest financial institutions, and insufficient documentation. Frameworks that neobanks rely on require people to have sufficient paper IDs to open an account — something they often don't have. Traditional KYC practices create barriers impassable for millions of people. 

Banks' AML policies make room for spontaneous account freezes without prior notice, making customers vulnerable to institutions' arbitrary decisions. Finally, legacy systems suffer from slow interbank transactions and offer poor transparency: users remain ignorant about how their funds are stored and managed.  

Neobanks did a great job in simplifying the banking experience, but their underlying infrastructure held back efficiency and financial inclusion. This is where blockchain comes in to provide an alternative. 

Decentralized finance (DeFi), a blockchain-based financial ecosystem, emerged as a response to inaccessible centralized solutions. Its vision was simple: to create a trustless, inclusive environment where everyone could participate irrespective of their location, citizenship, credit history, and wealth. Anyone with just a mobile phone and internet connection could access financial services such as borrowing, lending, interest earning, and instant borderless transactions. 

This vision resonated with many people: the total DeFi market cap surged from $600 million in 2020 to $98 billion in 2025. Broader factors support this trend: monthly active crypto users amounted to 220 million last year, with mobile wallet usage hitting all-time highs.

DeFi has accumulated the best of blockchain tech's possibilities. Users store crypto in their own wallets, meaning they have full control over their funds: no central entity can arbitrarily freeze them due to the slightest suspicions. Remittances settle in seconds instead of days, and the cost drops to a few pennies. Anyone can join whatever service they want, without any permissions. For example, you don't need a credit check to borrow crypto from a decentralized lending protocol: if you already own some coins, it will serve as collateral.  

Despite its benefits, DeFi has mostly gained traction only among tech-savvy audiences. Wallets and platforms are often complex and lack intuitive interfaces, making them unclear for the average consumer. Poor integration with traditional finance limits real-world use cases — for example, the ability to spend crypto on everyday purposes. 

Deobanking returns to the original vision of DeFi: inclusive finance for everyone and a convenient alternative to restrictive traditional tools.   

Deobank: Banking on DeFi Rails

Deobank is a term pioneered by WeFi — a banking platform launched by former executives of Tether, Wise, Exflow, and Tradeleaf. It takes the neobanks' sleek interface and combines it with the financial freedom of DeFi. The core goal of the Deobank is to make DeFi easy: wrap decentralized tools into familiar banking functions, simplifying onboarding for the masses. 

Those who need this simplicity include 1.4 billion of the unbanked. One part of this population wants to join the financial system but can't — banks often require paper IDs and a stable corporate job, leaving those without these privileges behind. The first-of-its-kind Deobank ecosystem will gradually enable paperless AI-based KYC with behavior-based identification, opening doors to everyone who needs access to financial services. 

Another part of the unbanked population doesn't trust centralized institutions and prefers storing money on its own. For those who want to maintain full control over their finances, WeFi offers self-custodial accounts. Users store their funds on-chain and own private keys, making it impossible to impose withdrawal limits or freeze their accounts. 

At the heart of Deobanking lie stablecoins. They allow for near-instant transactions at negligible fees — something that blockchain infrastructure can boast since all intermediaries are removed. Stablecoins are easy to use and let users retain control over funds. They also power many other DeFi features: customers can make deposits and earn interest, borrow funds, stake, and provide liquidity to grow their portfolio. Early adopters and WFI token miners can earn exclusive rewards, which contrasts with low neobanks' user engagement rates. 

WeFi's vision for the future spans two directions: expanding DeFi opportunities and strengthening the platform's use cases. For the former, WeFi will integrate with LayerZero omnichain protocol, connecting to other blockchains. For the latter, it will introduce virtual VISA cards, so users can pay with their crypto anywhere in the world with one tap (via Google Pay and Apple Pay); ATM withdrawals and cash-to-stablecoin swaps are also in the roadmap.

WeFi's strategic bet on stablecoins comes as their combined market cap reaches a record high of $230M. Meanwhile, traders are increasingly migrating to decentralized exchanges from centralized platforms. This signals a strong demand for self-controlled and borderless money, paving the way for the new generation of financial services. 

Image Credit: Unsplash 

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This content is for informational purposes only and not intended to be investing advice. Cryptocurrency is a volatile market; do your independent research and only invest what you can afford to lose. New token launches and small market capitalization coins are inherently more risky than large cap cryptocurrencies. These tokens are subject to larger liquidity and market risks.