Deobanks Are Coming: Meet WeFi, the First Decentralized On-Chain Bank

Fintech is advancing without cease, but a lot of people around the world still can't access basic banking services.

Fintech has been rapidly advancing, but a significant portion of the world's population still lacks access to basic banking services. Statistics highlight that approximately 1.4 billion adults are excluded from the formal financial system. This pressing issue hinders personal growth, stifles economic success, and ultimately slows down innovation.

Decentralized finance (DeFi) has already revolutionized finance by eliminating intermediaries and rendering transactions more transparent and efficient. Powered by blockchain technology, this industry has experienced meteoric growth, with billions of dollars flowing through platforms that empower users to lend, save, and transact without the involvement of traditional banks. From cross-border payments to lending, DeFi is streamlining processes and increasing transparency in various financial services. Now, a new type of digital bank, known as a deobank, is being developed to expand upon the benefits of DeFi and neobanks in order to serve those who are currently underserved by the financial system.

Neobanks have modernized digital banking with sleek apps and improved user experiences. However, they are still limited by the same legacy infrastructure and regulations as traditional banks. They face ongoing challenges with geographic restrictions, compliance requirements, and the administrative burden associated with KYC (Know Your Customer) procedures. These obstacles prevent neobanks from fully including large portions of the global population.

Many people, especially those without formal identification or who are located in challenging geographical areas, struggle to open bank accounts, access credit, or participate in global financial markets. Moreover, high fees, slow processing times, and the need for centralized approval in institutions like SWIFT for cross-border transactions create additional barriers to financial inclusion.

Deobanks, which stands for decentralized on-chain banks, are taking a novel approach by operating entirely on blockchain, free from the constraints of conventional banking. They aim to solve the issues faced by neobanks through their inherent transparency and the automation of financial services via smart contracts. From payments to savings and yield generation, every process is designed to be fully transparent, easily accessible, and inherently secure.

Setting up a standard bank account can be difficult due to strict ID requirements and complicated procedures. For instance, opening a bank account in the U.S. typically involves filling out a lengthy application form, providing several documents for KYC and AML (Anti-Money Laundering) compliance, and undergoing a background check. These processes can be time-consuming and inconvenient, especially for people who are new to the country or who prefer a faster and more streamlined experience.

Moreover, traditional KYC methods often rely heavily on manual labor, which is inefficient and prone to error. In today's digital age, we need a more agile and scalable solution to meet the growing demand for financial services.

Deobanks are gradually integrating AI to streamline the KYC process. While traditional KYC will still be necessary for now, the shift toward AI-powered verification will progressively reduce barriers and improve accessibility for those who lack formal documentation or prefer a faster onboarding experience. The quick and accurate verification process helps bring financial products and services to those who were previously out of reach.

For example, migrant workers and refugees may not have complete documentation in their host country, making it difficult for them to open bank accounts or access other financial services. Deobanks can use AI to analyze various data points, including social media profiles, online activity, and government records, in order to create a comprehensive digital footprint of an individual. This allows them to verify identity and financial history in a more efficient and accurate manner.

With their advanced technology and focus on financial inclusion, deobanks like WeFi are poised to revolutionize the banking industry and bring the benefits of decentralized finance to a wider audience.

Most banking systems, including neobanks, have deposits centralized in specific accounts. However, deobanks invert this model, placing control of deposits directly in the hands of the customer. They integrate digital currency and store it in user-controlled wallets, which are secured by private keys. This ensures that users' assets are protected and cannot be frozen without their knowledge.

In contrast to regular banks, which operate like black boxes with limited transparency, deobanks conduct all their activities openly. They manage transactions on a public and distributed ledger, which provides a high level of traceability and scrutiny. While privacy is still maintained, the nature of the public blockchain enables users to have a strong sense of accountability for the bank's actions.

Furthermore, deobanks leverage the broader DeFi ecosystem, tapping into services like staking, pooled lending, and automated market makers. The smart contract layer manages and enforces the terms of agreements, cutting through bureaucracy and overhead to create new opportunities for cross-border transfers, savings products, and credit facilities that are not reliant on large, expensive institutions.

WeFi stands out as the first decentralized on-chain bank, combining the services of traditional finance with the cutting-edge tools of decentralized finance (DeFi). It's a unique platform with several key features.

1. Low-Cost Cross-Border Transactions

Sending money from one country to another through