Digital banks don't depend on banks for money. Real gold deposits are stabilizing currency and identification
Original title:Neobanks Are No Longer About Banking
Original by Vaidik Mandloi, Token Dispatch
Photo by Chopper, Foresight News
Where does the real value of digital banks go
Looking at global head-count banks, their valuations are not dependent solely on the size of the user, but rather on the ability of individual clients to generate income. Digital Bank Revolut is a typical case in point: while it has fewer users than the Brazilian Digital Bank Nubank, it is overvalued. The reason for this is that Revolut diversifys its sources of income, covering various segments of foreign exchange transactions, securities transactions, wealth management and high-end member services. Nubank, whose commercial layout expanded, relied mainly on credit operations and interest income rather than bank card charges. For its part, the Bank of China has moved out of another path of differentiation to achieve growth through extreme cost control and deep embedding in the entanglement ecosystem。
Head Emerging Digital Bank Valuation
Encrypted digital banks are now approaching the same development nodes. The combination of wallets + bank cards can no longer be described as a business model and any institution can easily introduce such services. The platform ' s differentiated competitive advantage is reflected precisely in its chosen core liquidity path: some earn interest gains from user account balances; some pay for the flow of water on stable currency; and a few place their growth potential in the distribution and management of stable currency, which is the most stable and predictable source of income in the market。
This explains why the importance of stabilizing the currency track has become increasingly important. For reserve-supported stable currencies, core profits are derived from the return on the investment of the reserve, with interest on short-term treasury debt or cash equivalents. The proceeds are attributed to the issuer of the stable currency and not to digital banks that provide stable currency holdings and consumption functions only for users. This pattern of profitability is not unique to the encryption industry: In the traditional area of finance, digital banks are equally unable to earn interest from user deposits, and it is the cooperative banks that actually hold funds in trust that enjoy this benefit. The emergence of a stable currency has made the model of “separation of ownership of proceeds” more transparent and centralized, with interest income earned by the holders of short-term national debt and cash equivalents, while consumer-oriented applications are primarily responsible for optimizing the client and product experience of users。
As the introduction of the stabilization currency has grown in scale, a contradiction has gradually emerged: the application platform, which carries the flow of users, trade unions and trust, often does not benefit from the base reserve. This value gap is forcing firms to integrate vertically, away from mere front-end tool positioning and closer to the core of ownership and management of funds。
It is in this context that companies such as Stripe and Circle have stepped up their efforts to stabilize the currency ecology. They are no longer content to remain at the distribution level, but to expand to the areas of settlement and reserve control, which is, after all, the core profit chain of the system. For example, Stripe has introduced an exclusive block chain, Tempo, designed for low-cost, instant transfers of stable currencies. Instead of relying on existing public chains such as Ether's, Solana's and so on, Stripe built its own trade routes to control the settlement process, process fee pricing and trade throughput, all of which directly translate into better economic benefits。
Circe has also adopted a similar strategy, creating an exclusive clearing network for USDC, Arc. Through Arc, inter-agency USDC transfers can be completed in real time and do not cause congestion in the public chain network and do not require high handling fees. In essence, Circle built an independent USDC back-end system through Arc, which is no longer subject to external infrastructure。
Privacy protection is another important motivation for the layout. As Prathik explained in the article " Reshaping the chain of blocks " , every stable currency transfer is recorded in an open and transparent book. This applies to the open financial system, but there are disadvantages in business scenarios such as payroll, vendor payments and financial management. In these scenarios, the amount of the transaction, the counterparty to the transaction and the mode of payment are sensitive information。
In practice, the high degree of transparency of the public chain allows third parties to easily recover the internal financial position of an enterprise through block chain browsers and chain analysis tools. The Arc Network, on the other hand, allows inter-agency USDC transfers to be settled outside the public chain, both preserving the advantages of stable currency fast-tracking and safeguarding the confidentiality of transaction information。
USDT VERSUS USDC ASSET RESERVE
The stabilization currency is breaking the old payment system
If currency stabilization is at the core of value, traditional payment systems are becoming more obsolete. The current payment process requires the involvement of a number of intermediaries: the collection gateway is responsible for the return of funds, the payment processor completes the course of the transaction, the card organization authorizes the transaction and the opening bank of both parties finalizes the liquidation. Each link entails costs and delays in transactions。
The stabilization currency bypasses this long chain. Stabilized currency transfers do not require the use of card organizations, billing agencies or waiting for bulk clearing windows, but are based on direct point-to-point transfers from bottom-line network realization points. This feature has far-reaching implications for digital banks, as it radically alters the user's experience expectations that, if users were able to effect immediate transfers of funds on other platforms, they would never tolerate cumbersome and high transfer processes within digital banks. Digital banks are either deeply integrated into stable currency trading channels or become the least efficient link in the entire payment chain。
This shift has also reshaped the business model of digital banks. In the traditional system, digital banks can generate stable fees through bank card transactions, as payment networks firmly control the core of the flow of transactions. However, under the new system of currency stabilization, this part of the profit space has been significantly reduced: there is no transaction fee for the transfer of currency points to points, and digital banks that rely solely on bank cards for profit are facing a completely unbilled competitive track。
As a result, the role of digital banks is shifting from a issuing agency to a payment router. As payments move from bank cards to direct transfers of stable currency, digital banks must become the central node of stable currency transactions. Digital banks that can efficiently handle stable currency flows will dominate the market, as it will be difficult to switch to other platforms once users see them as a default channel for the transfer of funds。
Identification is becoming a new generation account carrier
Another equally important bottleneck has come to the fore: identification. In the traditional financial system, identification is an independent component: banks collect user documents, store information and complete audits in the back office. However, in the context of the immediate transfer of wallet funds, each transaction relies on a credible identification system, without which compliance review, anti-fraud controls and even the management of the underlying authority would not be possible。
This is why I have to goIDENTIFICATION AND PAYMENT FUNCTIONS ARE BEING ACCELERATED. THE MARKET IS MOVING AWAY FROM THE PLATFORM ' S DECENTRALIZED KYC PROCESS TO A SERVICEABLE, CROSS-COUNTRY, CROSS-PLATFORM-BASED IDENTITY SYSTEMI don't know。
This change is taking place in Europe, and the EU digital identity wallet is in the landing phase. The European Union no longer requires independent identification of each bank and application, but has created a single identity wallet endorsed by the Government, accessible to all residents and businesses. The wallet is not only used for identity storage, but also contains a variety of certified documents (age, proof of residence, licence qualifications, tax information, etc.), supports users to sign electronic documents and incorporates payment functions. Users can complete authentication, information-sharing on demand and payment operations in a process to achieve a seamless process interface。
If the EU digital identity wallet is successfully landed, the entire European banking architecture will be restructured: identification will replace bank accounts as a central entry point for financial services. This would make identification a public good and the differences between banks and digital banks would be weakened unless they were able to develop value-added services based on this credible identity system。
The encryption industry is also moving in the same direction. For many years, the relevant tests for chain identification have been under way and, although there are no perfect options, all exploration points to the same objective: to provide users with a means of authentication that enables them to prove their identity or relevant facts, without limiting information to a single platform。
The following are typical examples:
• Worldcoin: Build a global system of proof of personality to verify the true human identity of users without disclosing their privacy。
• Gitcoin Passport: Integrate multiple reputations and certifications to reduce the risk of witch attacks in the governance of voting and awards。
• Polygon ID, zkPass and ZK-proof framework: Supporting users to prove specific facts without disclosing bottom data。
• ENS + SUB-CHAIN VOUCHER: ALLOWS ENCRYPTED WALLETS TO DISPLAY NOT ONLY THE BALANCE OF ASSETS, BUT ALSO THE SOCIAL IDENTITY AND AUTHENTICATION ATTRIBUTES OF THE USER。
Most encrypted identification projects have the same objective: to enable users to identify identity or related facts independently, and identity information will not be locked into a single platform. This is consistent with the EU ' s idea of promoting digital identity wallets: an identity document can be accompanied by a free flow of users between different applications without the need for double authentication。
This trend will also change the operating model of digital banks. Today, digital banks regard identification as a core control: user registration, platform audits, and ultimately an account attached to the platform. However, when identification becomes a document that the user can carry autonomously, the role of a digital bank becomes that of a service provider that accesss the credible identity system. This will simplify the user opening process, reduce compliance costs and reduce double-checking, while replacing bank accounts with encrypted wallets as central carriers of user assets and identities。
Outlook for future trends
In conclusion, the core elements of the digital banking system are gradually losing competitiveness:The size of the user is no longer the moat, the bank card is no longer the moat, and even the simple user interface is no longer the moatI don't know. The real barriers to differentiated competition are reflected in three dimensions: the profitable products chosen by digital banks, the financial flow channels that depend on them, and the access to identity systems. In addition to this, other functions will gradually converge and become more and more alternative。
Successful digital banks in the future will not be a light quantitative version of traditional banks, but rather a wallet-prior financial system. They will anchor a core profitable engine, which directly determines the platform ' s profit margin and competitive barriers. Overall, the core profitable engines can be divided into three categories:
Interest-driven digital bank
The core competitiveness of such platforms is to be the preferred channel for users to store stable currencies. As long as large-scale user balances are absorbed, the platform can generate revenue through reserve-supported stable currency interest, chain gains, pledge and re-commitment, without relying on a large user base. The advantage is that asset holdings are much more profitable than asset flows. Such digital banks, which appear to be consumer-oriented applications, are modern savings platforms disguised as wallets, with core competitiveness providing users with a fluid memory experience。
Payment stream-driven digital bank
The value of such platforms derives from the scale of the transaction. They serve as the main channel for users to stabilize their currency collection and consumption, with deep integration of payments processing, businesses, exchange of French and encrypted currency and cross-border payment routes. It has a profitable model similar to the global payment giant, with little profit in individual transactions, but once it becomes the preferred channel of financial flows for users, it can generate significant revenues through a large volume of transactions. Their moats are user habits and service reliability, i.e. the default option when the user has a financial transfer demand。
Stable currency infrastructure digital bank
This is the deepest and most potentially profitable track. Such digital banks are more than just a channel of currency stabilization; they are more committed to controlling the issue of currency stability, or at least its base infrastructure, covering the core elements of currency stabilization, foreclosure, reserve management and settlement. The profit margins in this area are the most abundant, as the control of the reserve directly determines the attribution of proceeds. Such digital banks, which integrate consumer-end functions with infrastructure ambitions, are no longer mere applications but are moving in the direction of full-purpose financial networks。
In shortInterest-driven digital banks make money from user currency deposits, payments-driven digital banks make money from user currency transfers, and infrastructure digital banks, regardless of the user ' s operation, make sustainable profits。
I predict that the market will be divided into two main camps: the first, a consumer-oriented application platform, which integrates mainly existing infrastructure, with simple products that are easy to use, but with minimal user conversion costs; and the second, which moves towards the core areas of value aggregation, focusing on stable currency issuance, trade routes, settlement and identity consolidation。
The latter will no longer be limited to applications, but rather to infrastructure service providers in consumer clothing. Their users are extremely sticky, as they become the backbone of the financial flow of the chain。
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