The End of Neobanks. Why Stablecoin Banks are Taking Over

TL;DR

Neobanks modernised the UX of banking but kept legacy baggage: thin margins, costly ops, and limited global reach.

Stablecoin banks are the next leap; self-custodial, blockchain-native, and built for global scalability with lean teams and high margins. With account abstraction, passkeys, and regulatory clarity (like MiCA), the infrastructure is finally ready.

Moneda is building this future: borderless, secure, high-yield money. No middlemen, no jargon, just better finance.

Neobanks transformed fintech, but they’re hitting a wall.

Over the past decade, companies like Revolut in Europe and Nubank in Latin America redefined how millions manage money. With slick interfaces and banking-as-a-service (BaaS) rails, they built digital-first experiences on top of legacy infrastructure. But cracks are showing. Their margins are thin, scale is costly, and profitability remains elusive.

In their wake, a new model is rising - stablecoin banks: leaner, faster, and built for borderless scalability from day one. Neobanks are the MySpace of Fintech. Stablecoin Banks are Tiktok.

Neobanks: Paint over Rust

Neobanks emerged in response to legacy banking systems that were slow, paper-heavy, and resistant to innovation. By partnering with banking-as-a-service (BaaS) providers, fintech startups could avoid the complexity of acquiring a banking license and launch quickly. APIs became the new foundation, powering debit cards, savings accounts, and other core banking features.

However, this model has serious limitations.

Neobanks typically operate on razor-thin margins. Their freemium pricing strategies, low-fee accounts, and high customer acquisition costs leave little to no room for profitability. Most of them also do not have a banking license, meaning that they don’t hold customer deposits directly. As a result, they outsource lending and forfeit the most valuable revenue stream in traditional banking: net interest margin.

Operationally, they are not much leaner. Even as digital-first companies, they still carry the burden of legacy customer support, risk management, compliance, and fraud prevention. These functions are difficult to scale efficiently, and even with automation, operating costs remain very high. Regulatory and infrastructure demands add even further pressure. Licensing, KYC and AML tools, transaction monitoring, and cybersecurity all introduce ongoing expenses that erode margins. Additionally, they are bound by local regulations, making it harder for them to scale globally.

Neobanks succeeded in modernizing the user experience, but they didn’t transform the economics. It’s like painting over rust - the surface looks sleek, but the core structure remains fragile. For many of them, achieving profitability under this model remains an uphill battle.

Stablecoin Banking: The Next Fintech Frontier

Stablecoin banks represent a generational leap in the fintech industry, surpassing both neobanks and traditional crypto wallets. Instead of patching over legacy (neo)banking systems that come with heavy operational, compliance, and regulatory overhead, they build directly on blockchains. These next-generation fintechs use stablecoins to power checking accounts (also known as current accounts), offering faster, cheaper, and more programmable financial services that are natively on-chain.

For users, the experience is not only familiar but also better. Intuitive interfaces, access to open markets with deeper liquidity, and more attractive yield-generating opportunities. Stablecoin banks also match functionalities from neobanks in banking and card integrations. Users can receive debit cards and access virtual banking, directly integrated with their wallets, ensuring full functionality for spending and transfers via systems like SEPA or ACH.

What many in the industry, including VCs, have yet to grasp is how dramatically this architecture shifts the business model of banking. It enables lean teams to scale rapidly and efficiently across diverse markets and user segments.

Stablecoin banks can operate globally, free from the constraints imposed by traditional financial systems and regulatory overhead. Combine that with AI agents, code-gen and other AI tools and you've got a 10-20 person team that is extremely efficient and with a product that can reach millions on every continent. (Alpha: We are building one today using this model, targeting the European, LATAM and African markets with less than 10 employees and with high margins).

Stablecoin banks offer deposits, payments, yield accounts, and lending. They deliver all of this with greater speed, stronger transparency, lower costs, and a much broader reach than anything previously built on legacy rails. They integrate the best of Web3 and traditional banking.

Why Now? Because the Industry is finally ready.

I’ve spent 8+ years building core infrastructure in the blockchain industry, ranging from multi-network blockchain protocols, interoperability standards, wallet UIs, smart contract engines, to dApp stores. I can say with confidence that the ecosystem has reached a turning point.

The tools, standards, and infrastructure needed to support mass adoption are no longer hypothetical. They are here, battle-tested, and ready. There has never been a better time to build consumer-facing applications on-chain.

Several technical and regulatory breakthroughs in recent years have also made stablecoin banking truly viable in 2025. We are already leveraging many of these advancements in our own technical stack.

Account Abstraction and Smart Accounts

Account Abstraction (AA) and smart accounts represent a significant upgrade from the externally owned account (EOA) model used in wallets like MetaMask. EOAs are simple in design: they are controlled by a single cryptographic private key. If that key is lost or compromised, the funds are gone. You probably heard the case of James Howell who has been trying to find the hard drive containing his lost Bitcoin in a landfill (claimed to be worth over $760M).

In contrast, smart accounts are powered by smart contracts, enabling rich features such as multi-signature approvals, transaction automation, account upgrades, spending limits, and additional integration with third-party services via modules.

One of the most valuable capabilities unlocked by AA is social recovery. This means users can designate trusted contacts: friends, family, or even organizations as ‘recovery contacts' who can help recover access if the user loses their authentication method. Instead of managing a 12 or 24-word seed phrase, users benefit from more intuitive recovery options they are familiar with, significantly reducing the likelihood of permanent loss of funds if they lose access to their access credentials.

Another overlooked benefit is the ability to set up legacy contacts, trusted parties who can regain access to funds in case of death. I know people using legacy EOA wallets that have split their mnemonic keys in 4, gave one copy to different friends and family members and prepared a "death box" with recovery instructions to their accounts, like who to contact and how to recreate the full phrase. With smart accounts, apps can build in inheritance and recovery functionalities in a more secure and intuitive way.

Paymasters, Bundlers and Gas Abstraction

The main issue of having to pay transaction fees in a pay-per-use model is not the cost, but the psychology of fees. Say you receive 10 USD (in stablecoins) in your newly created wallet and you want to transfer money to a friend. You can’t actually do that because you need to pay gas (denominated in other token like ETH), so now you need to go to an exchange, open an account (if you don’t have one already), buy ETH, transfer it to your wallet and then begin the transfer to your friend. As a user, you feel frustrated every time.

With paymasters and bundlers, apps can now fully subsidize transaction fees, enabling users to transfer and interact with financial applications and services with the same UX as their (neo)bank.

Passkeys

Passkeys are a more modern, safer and easier alternative to passwords and two-factor authentication (2FA) and it’s no surprise that they are now the recommended method on accounts on Google, Apple, WhatsApp, etc. Passkeys allow users to authenticate using hardware keys or biometrics like Face ID without having to enter a username or password or provide any additional authentication factor. They’re phishing-resistant because passkeys rely on cryptographic authentication tied to the specific website or application, making it impossible for users to be tricked into entering their credentials on fake or malicious sites. Additionally, they’re automatically synchronized across devices (when using a password manager) and don’t rely on codes or passwords that can be intercepted or forgotten.

Passkeys now have widespread ecosystem and OS-level adoption and they offer the best and most secure option for users to sign transactions using biometric authentication, without needing to manage passwords, seed phrases or private keys. This level of protection, combined with their ease of use and synchronization, makes passkeys an ideal authentication method for self-custodial stablecoin banking. They bridge the gap between security and usability, empowering users to retain full control over their assets while enjoying the frictionless experience of modern fintech apps.

Regulatory Clarity

The EU’s Markets in Crypto-Assets (MiCA) framework brings the first comprehensive regulations for stablecoins, enforcing 1:1 backing, clear issuance standards, and consumer protections. This legitimizes euro- and dollar-backed stablecoins for institutional and retail use alike. Circle’s USDC and EURC are amongst the most widely adopted stablecoins that are now compliant with MiCA.

In the U.S., the recently proposed GENIUS Act signals regulatory clearance in the stablecoin industry. The bill outlines key requirements for issuers, including holding reserve assets backing the stablecoins. It also prioritizes coin holders for repayment in the event of bankruptcy and enforces compliance with AML and anti-terrorism financing rules.

Virtual Banking and Stablecoin-Fiat Rails

Integrations with virtual banking infrastructure, such as virtual named accounts, allow users to on-ramp fiat directly into stablecoins with near-zero fees for users. These virtual accounts are assigned uniquely to each user and can receive SEPA, ACH, or wire transfers just like a traditional bank account. Once funds arrive, they are automatically converted into EUR or USD stablecoins and deposited into the user’s self-custodial wallet, removing the need for intermediaries or custodians.

This same infrastructure enables seamless off-ramping too: users can send stablecoins from their wallets and have the equivalent fiat settled instantly into linked bank accounts through supported local rails such as SEPA, ACH, and wire transfers, SEPA debits or even transfers to mobile money networks in Africa. For the end user, this means the same banking experience they expect, deposits, withdrawals, and transfers, only now via a self-custodial stablecoin banking app.

The Next 5 Years

As the infrastructure stack matures, expect a wave of fintech companies to go fully crypto, not to chase memecoins or NFTs, but to rebuild financial infrastructure from the ground up.

Stablecoin banks are quietly replacing costly BaaS providers with on-chain rails, while delivering a modern UX powered by account abstraction, self-custodial smart accounts, gas abstraction, and passkey-based authentication.

This combination of open markets, liquid DeFi protocols, low-cost global scalability, regulatory clarity, and seamless fiat on- and off-ramps gives stablecoin banks a decisive edge. They offer the same convenience users expect from neobanks, but with better economics, higher resilience, and global accessibility. Most importantly, they deliver true self-custody without sacrificing usability.

Just as neobanks outpaced legacy institutions by embracing APIs and digital UX, stablecoin banks will surpass neobanks by adopting programmable money, modular infrastructure, and user-owned finance. In the next five years, the most innovative fintechs will not look like banks at all. They will be borderless, software-native, and powered by stablecoins.

For most people, banking is broken.

It’s slow, expensive, quietly predatory, and frankly outdated.

If you’re lucky enough to be inside the global financial system, your money earns next to nothing while your bank quietly profits from it. If you’re on the outside, living in a country with inflation, capital controls, or poor infrastructure, good luck accessing real yield, fast payments, or even the basic right to participate.

But let’s be honest: the supposed alternative, crypto, has huge barriers of its own. The tech is ready, but adoption is an uphill battle: unnecessarily complex terminology, wallet apps that look like aircraft cockpits, gas fees that eclipse the very transactions they’re meant to power, clunky on-ramps, and questionable compliance. And crypto’s reputation? Abysmal, with headlines dominated by meme-coin scams and bridge hacks.

The promise of open finance remains barricaded behind complexity, volatility, and insider jargon.

The net effect? The very people who could benefit most from borderless, censorship-resistant money (remittance senders, young professionals, migrants, savers in inflation-stricken economies, entrepreneurs priced out of global banking rails) remain locked out of both legacy finance and its crypto alternative.

We think that’s insane. So we’re building something better: Moneda.