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Over the past decade, neobanks have reinvented consumer finance with sleek interfaces, fee-free accounts, and instant payments. But behind the design revolution lies a troubling truth. 76% of neobanks are unprofitable, even though customer numbers have soared to hundreds of millions.
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Deja vu for neobanks, but worse, crypto wallets copying zero-fee card strategies are inheriting a model that has already failed in fiat, and stablecoins are compressing margins further towards zero. Payment is a trap, not a business. There are limits on exchange, exchange spreads are disappearing, and crypto cards are racking up blockchain costs on top of card rail overhead. Cheap payments won’t fund compelling apps or growth. The card must become a loss leader. The only sustainable model is to treat payments as distributions and monetize them through high-margin on-chain finance, such as swaps, yield, RWA, and portfolio products.
Crypto-native payment apps risk falling into the same trap, just using more complex technology. Stablecoin wallets and “crypto neobanks” are racing to launch debit-style cards, cross-border payment tools, and zero-fee offers. The problem is that the neobank model was already weak in fiat currencies. As stablecoin spreads and settlement fees compress, copying that strategy becomes even less sustainable.
Payment alone cannot pay the bill
Neobanks were built on card economics. Their main source of revenue was interchange, or fees that merchant banks pay issuers for each card transaction. But in most major markets, that pool is intentionally shallow. In the US, Regulation II under the Durbin Amendment limits large issuer debit exchanges to $0.21 plus 0.05% of the transaction, with a small fraud protection add-on. In the EU, exchange fee regulations limit consumer debit exchanges to 0.2% and credits to 0.3%.
These constraints have left neobanks struggling to fund cashbacks, attractive apps, and relentless marketing. Fee income declined as customers spent less. Margins came under further pressure when regulators tightened the cap. Some well-known neobanks have been in the market for years, only reaching profitability after pivoting heavily to lending and fee-based services.
Low payments are a lure, but it’s not a business.
Stablecoins further squeeze margins
Next, using the already thin model, we add a stablecoin. Stablecoins settle almost instantly with transparent on-chain pricing and minimal exchange friction. International stablecoin flows will reach approximately $2 trillion in 2024, particularly in regions where traditional cross-border rail is slow and expensive.
As stablecoins move into mainstream payments through pilots with networks like Visa and integration into consumer platforms like Zelle, users will quickly learn that spreads can be close to zero. This makes it very difficult for any crypto neobank to justify large exchange margins and opaque markups on card-based spending. The very technology that makes the experience so compelling also erodes the profits that kept early neobanks afloat.
Card-based crypto products also inherit the worst of both worlds. They must maintain KYC, fraud monitoring, and chargeback workflows that meet global card schemes while funding on-chain infrastructure, wallet security, and custodial regimes. Rather than replacing traditional costs, many crypto cards simply pile blockchain overhead on top of card rail obligations.
Cards should be handouts, not products
For cryptocurrencies, the conclusion is unpleasant but necessary: treating payments as a core business is a dead end. A more sustainable model is to treat cards and everyday transactions as distribution, a way to acquire and retain users. Therefore, value creation takes place in high-margin on-chain finance.
Some digital banks are already charting this path with fiat currencies. The increase in revenue was not driven by trading, but by lending, trading and asset products that are more like securities trading and investment platforms than just checking accounts. Crypto platforms have an even wider design space. On-chain swaps, structured yields, access to tokenized real-world assets, and curated portfolios can all generate healthier fee pools than card swipes.
In that architecture, wallets and cards are not “products.” It’s an interface to the deeper stack of financial services, and it’s not where business models stop, it’s where users first arrive.
Zero-fee cards only work within richer stacks
Crypto cards with zero fees or high cashbacks should not be interpreted as evidence that payments have suddenly become profitable. It often indicates that you are betting on monetizing what happens after the first trade.
Wallets that refund currency markups and suppress spreads are effectively restoring the profit line of the neobank era. The assumption is that once users are comfortable using stablecoins at the point of sale, they will also want to trade, stake, allocate to RWA, or use embedded yield tools within the same app. The economics are driven by routing, spreads, and success fees on these higher value activities, rather than interchange rebates on coffee purchases.
When viewed through that lens, zero-fee cards are more like acquisition channels than margin engines. It functions like a retail loss leader, but is connected to on-chain finance.
Cryptocurrency has a chance to break out of the neobank group
The broader story of stablecoins underscores the urgency of this rethink. The amount of stablecoins in circulation is now in the trillions per year, and traditional financial institutions are no longer on the sidelines. Most large banks are already experimenting with stablecoins for cross-border payments and liquidity. Stablecoins and USDC (USDC) are gradually making inroads into retail payments, merchant acquisitions, and money transfers, often at lower fees than traditional card fees.
If crypto-native apps respond by using tokens to reinvent the neobank model, the results are predictable. Years of user growth are followed by brutal margin compression and consolidation. A more ambitious path is to accept that payments are infrastructure and design business models around the high-value tier that programmable money enables.
Cryptocurrencies do not need a new generation of low-margin digital banks. We need wallets and platforms where cards and stablecoins act as a gateway rather than an entire house, where payments, assets, and on-chain finance mutually reinforce each other.
