The news: US neobank Current plans to incorporate elements of decentralized finance (DeFi) into its consumer-focused lineup by rolling them out on a “hybrid finance” basis, per an American Banker feature.
A tech overview: DeFi enables consumers and companies to engage in peer-to-peer (P2P) transactions without going through financial institution (FI) intermediaries, per an Investopedia primer.
Current is pursuing a blend of both, known as “hybrid finance,” American Banker said. This approach is designed to expose customers to aspects of both DeFi and traditional banking.
Customer experience: Current developed its own banking core and also collaborates with DeFi network Acala, which already gives it the technological building blocks for hybrid finance, American Banker noted.
Its hybrid approach lets Current introduce DeFi elements that are easier to use than standalone DeFi would be, per a pair of American Banker interviews.
Johnson said it’s rare for a neobank to offer a hybrid approach. He was only able to recall one example of a challenger doing so, which could help Current stand out from other challengers, he noted.
The opportunity: Hybrid finance could help shore up Current’s competitive standing with younger consumers. It started out as a teen-focused neobank before branching out, and says its average customer age is 27.
However, the neobank will need to handle hybrid finance with care: Crypto products that behave like depository bank accounts, but lack protection from the FDIC or NCUA, have drawn regulatory scrutiny. Current will need to engage proactively with regulators and clearly communicate to customers the risks that hybrid products pose compared with traditional products.