Inside the Rise of the Stablecoin Neobank with Brookwell

Host Dante Reminick sits down with Ravi Riley, Co-Founder and CEO of Brookwell, for the next episode of Stable Pulse: What's Next Beat to explore what it will take for stablecoins to power everyday banking. They discuss the difference between crypto wallets and true neobanks, why traditional banking features like ACH, FDIC insurance, and regulated infrastructure still matter, and how stablecoins can seamlessly integrate into consumers' financial lives.

The conversation also dives into tokenized deposits, sponsor banks, payment rails, and the evolving regulatory landscape shaping the future of digital finance. Ravi shares why the next wave of innovation won't replace traditional banking. Instead, it will build on top of it by making global, low-cost payments and on-chain financial services accessible through familiar banking experiences. Whether you're building in fintech, crypto, or simply curious about where banking is headed, this episode offers a clear look at what's next.

Subscribe to Stable Pulse for more conversations on the future of stablecoins, payments infrastructure, and what’s next in fintech.

Connect with the Host and Guest:

Dante Reminik: https://www.linkedin.com/in/dante-reminick / https://x.com/DanteReminick

Ravi Riley: https://www.linkedin.com/in/raviriley/

About Stable Pulse

Stable Pulse is a fast-paced, news-driven podcast covering the most important developments shaping the stablecoin and digital asset ecosystem. Each episode dives into timely conversations with industry leaders, operators, and policymakers, offering sharp insights and real-world perspectives on where the market is heading. With a focus on clarity and relevance, Stable Pulse breaks down complex topics into accessible, actionable takeaways for anyone building in or exploring the future of finance.

Transcript

Intro

Intro 0:08

Stablecoin issue of debut right here at the Name Deck Today.

Dante Reminick 0:13

So we have talked about NeoBanks a few different times on this show, but we haven't talked to a neobank yet. So today we're gonna do that. Ravi, welcome to the show. We're gonna talk all things banking, all things neobanks, all things, you know, why banking needs stable coins and everything like that. Very, very excited to have you on.

Braggadocious And Brookwell Origin

Dante Reminick 0:35

For the listeners who have been following the show, you know that we always start off with a segment that we call braggadocious. And Ravi, for you, the goal of this segment is to introduce the audience to not only yourself, but also to Brookwell and what you're building. But we want you to sort of leave humility at the door and brag about yourself, brag about Brookwell as as much as possible. So, Ravi, thanks for coming on the show. I'm excited to hear you brag, my friend. Go for it.

Ravi Riley 1:00

All right. Not not my strong suit bragging about myself, but I'll do it. Too bad.

Dante Reminick 1:04

Gotta do it anyways.

Ravi Riley 1:05

Yeah, yeah, yeah. Um, so yeah, my my name is Ravi. And uh let's see, I've been building in the sort of crypto uh payments space for the last five years. Um and me and my co-founder uh settled on building Brookwell to bring stable coins and the benefits of stable coins uh to everyone. So what we're building is the first, I think, uh real neo bank, depending on whose definition you use, where we're working with a regulated uh bank to offer real banking services alongside uh sort of pairing that with stablecoin infrastructure um and taking the benefits of stables to give people really the best of both worlds. Um and we're kind of the first to do this because I think it's the hard path, and I think neobank has become a little bit of a nebulous term with multiple definitions, but I kind of like to use the old definition of um kind of the ally banks of the world and um the Mercury's and Ramps and Brex is sort of just a digital first bank. Um but uh yeah, not to get too deep into that, but uh I think there's a lot of crypto neo banks that are kind of a glorified wallet with a card. And the big piece for what Brookwell is doing is we can actually replace your Chase or your B of A or whatever you're using for your current checking account and be like 10x better than it. So give you all the functionality you would expect. You can pay your rent, you can uh buy a house, you know, you can you can do all of these things you'd expect from your bank, um, and you can move stable coins, move money on chain, uh get access to DeFi yield, things like this.

Why Neobanks Need To Exist

Dante Reminick 2:52

Awesome. So you mentioned there are a lot of crypto neo banks, a lot of them are in your mind doing it wrong, you guys are doing it right. Let's sort of even take a step back from there. Talk to me about why neo banks need to exist and you know what makes Brookwell different, or why are you guys doing it the right way?

Ravi Riley 3:13

That's a great question. Uh I would I don't know, I'd I'd hesitate to say we're doing it the right way, and other people are doing it the wrong way, because I think neobanks uh very much serve a clear use case regardless of the underlying infrastructure. Um generally they'll serve one specific ICP infinitely better than uh sort of a big bank like like Chase would be able to do. Um and we're kind of seeing this definition broaden from everything to deposit accounts to like financial services. Um but I think that right now, because the underlying infrastructure to build neobanks has become a little bit more commoditized, we're seeing this explosion of people building specific sort of specialized neobanks that serve a specific customer very, very well. Um and I can delve into some examples, but generally I think that um neoban have always been something that pushes adoption uh and and good UX. Um but I think the real kind of litmus test for if a neobank is gonna win is if their ICP or who they serve can actually use them for their primary financial needs and not as like an add-on or or a sort of additional app and then still needing something else to do their primary financial relationship stuff.

Dante Reminick 4:31

So what does that mean pragmatically though? Like as as a user, and you can tell me if this is you know retail users or business banking or whatever it might be. Why do I need a neo bank? Why can't I go to JP Morgan or to Chase or to Wells Fargo and get all of these things done with them?

Ravi Riley 4:52

It's a great question. Yeah. So I think there's really a few answers here, um, but it it depends on what the neo bank's structure is. So there are, of course, like regulated industries where a traditional bank with regulated banking infrastructure might not be able to serve those industries. We're seeing a lot of um interesting stuff around uh banking for creators or like banking for people who are um in maybe uh I don't know, building dispensaries or like OnlyFans creators or things like this, or people who need financial services, but maybe the traditional uh traditional flows just don't uh play play nice with their industries. Um we're also seeing how uh when you build something that's specific to one ICP, you can really focus on their needs and meet them better than kind of a general solution. Um I might make the analogy of like a chef's knife versus a Swiss Army knife. Your big bank with a with a branch and you know physical locations, um, they might be your Swiss Army knife where they can do many different things, but each individual tool for a specific purpose might not be as perfectly honed as your chef's knife for uh for a specific specific need. Um one example of this is actually another company building on on seismic. Um they're building for import-export businesses. So they're able to really hone in on getting super competitive rates for FX and then build the FX directly into their bank so that, or rather, banking experience, uh, so that they can uh give people like a dollar account that they want and not have to use these like external tools. Um so I guess in a in a nutshell, I think the most powerful answer is when you take uh financial services that your ICP needs and combine it with their primary financial relationship so that they can use you for many different things that all meet their needs together in one solution.

On Chain Finance Meets Real Banks

Dante Reminick 6:50

Yeah, interesting. And I think it's important to note that neobanks inherently are not fighting directly against these big banks. It's actually quite the contrary, where they still need to have deep relations in the traditional financial market in order to make the world of on-chain finance and on-chain banking actually work for them. I know that you're experiencing this firsthand, building out your own neo bank from the ground up. Can you walk me through what that looks like, what the relationship between on-chain finance and the traditional finance world actually looks like uh in your experience of building Brookwell from zero to one?

Ravi Riley 7:29

Yeah, I would say there's definitely been a lot of institutional adoption uh across DeFi and just generally on-chain over the last year or two. Uh when we first started Brookwell, no one was really talking about uh crypto neobanks. They weren't really a thing. And now uh everyone and their mom is kind of starting a neo bank, right? Um I think that there's a few big pieces um that are helping with different parts of the neobank stack. We're seeing a lot of big asset managers start to do tokenization of their money markets, T-bills. So this brings like very easy access to high-quality RWAs that are real-world assets for the audience. Um, if anyone is unfamiliar with the crypto jargon, it just means uh when you take something that's like a money market or a T-bill and tokenize it so that people can access it with on-chain liquidity. Um, we're seeing a lot of activity around that. We're also seeing a lot of activity around issuance, um, where people can now kind of issue their own stable coins, own that part of the stack um without needing to necessarily have a charter or be um a bank. And uh all sorts of other kind of infra pieces that I think are aligned with people building neobanks. Um I still think my maybe my hot take on the on the on-chain finance side is we do very much still need traditional institutions. And I think that there is a future where we can do things like uh pay rent with our stable coins or pay off our credit cards with stable coins, but I I don't think we're quite there yet. And I think that uh playing nice or even having interoperability between on-chain finance and traditional finance is super important. Um but of course, there are certain things you can do on-chain that you can't do when you are interfacing the regulated institutions, um, as we've very much experienced. So uh I think there's a trade-off, but generally I would say a lot of uh sort of institutions are no longer able to ignore on-chain finance and they're they're becoming uh much more mature overall on the on the on-chain side.

Dante Reminick 9:40

Yeah, that's that's super interesting. So given then what Brookwell does, right, in terms of amalgamating on-chain finance with traditional finance, what role do you think that these existing banking institutions or these traditional finance institutions play in a world where you know neobanks are offering better solutions to more niche customers? Right? Why do these traditional organizations still need to exist? What role do they play?

Ravi Riley 10:08

All of that fun stuff well, uh I would say getting a charter is hard. We're

Sponsor Banks And Why Charters Matter

Ravi Riley 10:16

seeing it get uh maybe easier, and a lot of uh the floodgates have been opened, so to speak. Like more people are getting access to building real banks and not just access to sponsor banks. Um, but I think that uh that said, it's still a huge undertaking, of course. So I think that uh the current model of sponsor banking and fintechs uh kind of still applies to the new era of neo banks. You look at big neo uh fintechs that are neo banks essentially, um like Ramp and Brex and Mercury, and none of them are uh directly owning a charter or um banking infrastructure. Now, Mercury just got conditional approval for one, you know, they're they're all probably eventually gonna have one, but uh after they're quite mature as a as a fintech company as a as a fintech company. And so uh I believe that uh managing like risk and compliance is still a huge, uh, huge, hugely important endeavor. Um, and a lot of people building neobanks uh in the kind of current definition of a neo bank aren't ready or want to necessarily deal with that burden. They want to just serve their customer and serve them well, and they're happy with you know making a bank some money if that means that they can provide banking services uh to their customer without necessarily um taking on the full burden of being being a full chartered bank?

The Neobank Stack Explained Simply

Dante Reminick 11:44

We just threw on a lot of jargon, right? We talked about bank charters, the OCC, um, you know, we're sort of leaning towards virtual accounts and FBOs. Can you just take a second and really clearly define what all this means and what the relationship is between these so-and-so, you know, so-called neobanks and uh traditional financial institutions? Like, you know, explain to me like I'm five.

Ravi Riley 12:09

Absolutely. Uh this is something that I think uh is is super important. The the Neobank is uh in in many ways multiple layers of abstraction down from like a bank bank. So uh starting at the Neobank layer, Neo Bank is kind of uh a wrapper in many ways on other people's infrastructure. So a neobank might want to serve a specific demographic. Maybe that demographic wants FX, maybe they want loans, maybe they want banking services. So the NeoBank's job is to build a nice user experience where they maybe find uh a regulated institution to do banking services, or maybe they bypass that entirely and just use stable coins. They'll find someone who can maybe offer yield, they'll find someone else who can do loans or FX, and they bring all these APIs and functionality together into one app. Um, but they're more so kind of at the application layer. Um maybe one step down from there, you have infrastructure providers. So something like an on-and-off ramp, they might have money transmission licenses and they're able to facilitate the movement between fiat and stable coins, typically dollar-backed stable coins. Um so they might not be a full-on bank, they could be, they but they probably have money transmission licenses so that they're able to kind of take on that liability and do the ramping activities. Um, one level below that, you might have a you know, uh, a real chartered bank where um to kind of zoom out a little and look at the whole stack, um a chartered bank is you know, when you when you think of the bank emoji and you have the columns, like this is this is what a real bank is. And there's a reason that neo banks can't call themselves banks. It's because um they aren't regulated as one. And so when you say like you have an OCC approval for a bank, this means that the government uh is giving them access to uh the Federal Reserve essentially. And so um things like FDIC uh are only accessible to regulated banks, and uh they're as you'd expect, under a lot more uh kind of scrutiny and regulations and rules that they must follow as a regulated bank than something down the stack like a NEO bank or even a ramp provider. Um so as you move down the stack, you get deeper into compliance and regulatory requirements. You also uh get deeper into access to things like FDIC insurance um and like lending and other bank-only bank services. Hopefully that avoids some of the jargon.

Convergence Between Banks And Neobanks

Dante Reminick 14:51

Yes. I want to synthesize this really quickly because I think that we are meandering around two very important points. It sounds like from what you're telling me, traditional financial institutions still are playing a role because they have government OCC charters, right, which provides them with regulatory clarity, structure, uh safety, et cetera, et cetera. That's sort of one part of this. And then the other part of this, you have these more modern banks, right, what people call neo banks, which try to offer banking services, but are not often themselves a bank, and are a lot of the times, in in the case of especially this show, trying to offer better services using better money in the form of stable coins to a very specific niche audience. So given that you have these two parties, right? Your centrial banks with OCC charters and everything like that as group number one, and then group number two being your your neo banks, what is the convergence of the banking industry actually look like? Are we gonna see you know these large institutions, these traditional financial players adopt stable coins and start doing very, very similar things to what neo banks are doing today? Are we going to see neo banks try to steal a page from you know the traditional finance book and just go out and get OCC charters? What where does this all sort of lead to?

Ravi Riley 16:17

I think all of the above. We're gonna see both, and we're already seeing both. But I think that uh the the caveat there is I would say big big fintechs are going the stablecoin route, but um despite a lot of the institutional adoption that I mentioned before, um, banks are still weary of stables because uh to the bank, it's basically just a measurement of of a deposit at someone else's bank. So it's not a tokenized deposit, it's it's a stablecoin, and these are these are separate. And so uh even the kind of pioneers of stablecoin adoption like Erebor, they're uh not really holding the stable coins. They they leverage them as a payment rail, um, but not as something that they want to hold uh like hold as on their balance sheet. Because again, you know, it's very different than them getting a deposit in in their bank. Um most stable coins through Circle or Tether or whoever the issuer is, they're making money by uh earning the risk-free rate on the cash that backs the stable coin. So um they may they may not go into the stablecoin route, but because uh, like you said, stable coins are better money and give you access to things um in a very seamless way. I think we're very much going to see big fintech players uh who currently work with regulated institutions and maybe are limited because of that in who they can go after, um will open up stablecoin-only accounts and offer their services uh to people all over the world and not just whoever their their bank lets them access. Um and then on the neo bank side, I think we're gonna see more and more neo banks uh want to be able to offer things like lending directly uh or even issuance or other things that require being a bank. And so I think feature-wise, we're seeing this convergence very slowly and very early on in that convergence between uh neo banks serving more people using stable coins um and potentially also expanding to the point where they want to offer uh banking services directly and pursuing charters. Um I think Mercury is a great example of this. We've seen them uh go from their their first sponsor bank, then to call them, and now to getting conditional approval to become their own full-on bank. Um, and they kind of won by being this uh this digital-only neobank that offered better banking service experience um to people without having to right from the beginning become their own bank and that let them scale to uh you know billions of dollars. So I think uh generally it's it's clear to me that people want financial services and uh as it becomes easier to access them, both sides of the stack will will kind of converge.

Dante Reminick 19:07

Love it. And we've

Brookwell Accounts Ramps And Yield

Dante Reminick 19:09

been talking about neobanks and and banking broadly. Let's talk about Brookwell now. Where do you guys fall on this spectrum? How are you guys building this out? Tell me everything.

Ravi Riley 19:20

So in in some ways, uh this kind of segues because we are at this convergence where we are a neo bank who is not pursuing our charter right now, but um we're combining the stablecoin world with the with the traditional traditional banking services world. So Brookwell uh lets you have access to a uh checking account. That's an that's a named FDIC insured checking account from um our sponsor bank, which is Erebor. And we pair that with a stablecoin sort of non-custodial wallet that lets you do things like access DeFi yield. Um and of course, this is not FDIC insured because it's it's stablecoins and uh not deposits at a bank. Um and then through through Erebor uh and some of our other partners, we give you completely free ramps uh between stables and fiat and your savings account, your checking account, or what we call the savings account is is really uh a stablecoin account. Um and I think that's a big unlock because uh there's a lot of benefits to using stables as a payment rail, but um we're not quite at the point where you can use stable coins like you can use fiat. I can't pay my rent with stables, unfortunately. Um and we're seeing a lot of areas where people are leveraging stables as a better, better money, better payment rail. Um, but the last mile problem is is not necessarily met. So one example of this is um there's a lot of these like pre-funding workflows where uh people are taking delivery of stuff, they might have capital locked up, maybe like T plus one prefunding, or even a simpler example actually, uh, is like payroll, right? Uh you could you could pay your people and they have to wait three days to get their paycheck because ACH is slow. Um, and if I could as an employer send my payroll with stable coins, this is basically faster and cheaper and uh delivers right away and almost better in every way, but you know, my employee might not be able to spend those stable coins on their bills and their credit cards and their rent. And so um we kind of solve this interoperability problem at the last mile, where because we let you move stable coins um into and out of your your checking account or your your bank account has a wallet um that basically not instantly but within a few minutes will convert your deposited USDC or USDT or whatever it is into you know dollars in a bank account. That that completely solves this. And I think um I'm I'm super excited to get this out there because that alone enables us to do a bunch of very interesting things um to give people the benefits of stables without even. Really knowing uh what a stable coin is. Um so I I can I can uh yap about Brookwell all day, but um one of those benefits is actually FX. So

Stablecoin Sandwich For Cheaper FX

Ravi Riley 22:11

uh we can do like stable coin sandwich stuff, um, meaning pause. What is that?

Dante Reminick 22:15

Yeah.

Ravi Riley 22:16

Yeah, so that stable coin sandwich is sort of the the term to describe generally um how to do cheaper exchange between fiat currencies. So you can go from fiat to stable coins in the middle, and then fiat, so the the fiat sandwiches, the stable coins in the middle. Um you can do things uh like compete with uh maybe fiat to fiat transfers or for an exchange by going from uh dollars to stable coins. I send them to Dante. Uh maybe Dante is in a different country where he can off-ramp those stable coins to his local currency, um, but the total cost of the transfer is basically just you know maybe a penny because the gas fee for sending a stable coin transaction is super low. Um and then the total fees would just be whatever my cost is to go from cash to stable, and then whatever Dante's cost is to go uh locally from stable to his fiat currency. Um so because we let people interopt between stables and cash, uh, we can open up a ton of these stablecoin sandwich type of Rails where imagine uh you have your dollar bank account, but you can deposit and withdraw any fiat currency. Um that's pretty cool. Uh and then also any digital asset that we can support. So you don't you you don't even necessarily need uh your currency exchanges, maybe even your um digital asset exchanges when your your bank account can uh kind of interoperate between uh the various currencies that you would use, digital or otherwise.

Who Brookwell Serves First

Dante Reminick 23:47

Interesting. So me personally, I live in the US, I bank at a traditional financial institution. What type of people or companies would need to bank at a neobank? Like who who are you guys going after who really need Brookwell and they can't do what they need to do on a traditional financial institution?

Ravi Riley 24:13

Yeah, this is this is a great question. Um I would say the I'll frame the answer with kind of the the one-sentence Brookwell explanation, which is a checking account with 1% PPY, up to $50 million in FDIC insurance on the checking account, and then up to 5% APY on the stablecoin, not FDIC insured uh savings account. And so this already is kind of a better offering than most uh people's checking account bank uh even without the free ramps, because um most people are earning 0% and only get up to 250k, which is the standard amount, um, in FDSC insurance. And so off the bat, from the commoditized angle, we we have a clearly better offering there. But who needs Brookwell right now? The biggest delta between what we offer and what a specific group of people has is right now crypto natives, because you could have a lot of our early users are people who have you know on-chain wealth and they're maybe in New York City uh and they can't show their their fun coins to their landlord to be able to pay their rent. Uh they they maybe want to um you know engage with with things that uh someone with their level of wealth would want to engage with, but they're uh not they're lacking access to like a uh something that connects their on-chain wealth to these traditional rails. Um and so for that group of people, we solve a huge pain point because uh with existing solutions, even just going from USDC to dollars in a in a large transaction, if you don't have access to like an OC OTC over-the-counter desk or find some guy who's willing to trade with you for cash, um, it's difficult to not lose a bunch of money on fees. Um and the current rails are really lacking. There's people who will spend you know five to ten percent uh just to load up uh a debit card or a visa gift card type of uh product uh to be able to spend their on-chain wealth. And so um there's that piece, and then for that same group as well, uh because we are working with uh with Erebor and they're doing some interesting stuff with uh with crypto, um, we can also offer in the future, hopefully, uh things like over-collateralized uh loans on majors like Bitcoin or Solana or ETH directly in the in the banking app where you can instead of having to worry about code risk on Ave getting hacked or something, just go straight to to Brookwell um and and get your get your over-collateralized kind of no-brainer loans there. Um But in a nutshell, we serve people who are who are on chain who want to spend off-chain and don't have a good uh way of doing that with with anything else. Interesting.

Dante Reminick 27:09

Super, super interesting. You mentioned

Why Neobanks Are Exploding

Dante Reminick 27:12

earlier in the podcast that there are a ton of neobanks popping up. Why do you think there's so much supply increase in the amount of neobanks that are popping up? And do you think all of them are needed?

Ravi Riley 27:28

I would say supply increase is definitely because the infrastructure needed to build a neo bank has become uh pretty heavily commoditized. When I say commoditized, I really just mean um it's not prohibitively expensive or prohibitively difficult engineering-wise to kind of get the bare minimum you would need, like a virtual account um for dollars or a stablecoin wallet, and then find someone who's willing to give you a way to spend that money like uh like a card provider. And so um the the bare minimum kind of crypto Neobank is basically just a wallet that can hold stable coins with a card that lets you spend those stable coins.

Dante Reminick 28:06

Um is that what Brookwell is, or do you guys take it further than that?

Ravi Riley 28:11

We yeah, we definitely take it further than that because we offer uh banking services where you get FDIC insured checking accounts that can do all the things your existing Chase or your B of A can do. So not just what uh not just spending from a card, but ACH pools where you can pay your rent, you give your landlord a routing number and account number, and they pull funds out. Um we can do uh paying off your credit cards with ACH pools. I would say ACH pools, uh not to get too deep into it, but the the big one of the big pieces with um with infrastructures is ACH pools. So you can see on the neo bank stack the the most basic thing is a wallet with a card. Maybe the next level from there is a wallet and a card with a virtual account, maybe provided by a bridge or an iron like Moon Pay, um, where this is not not a full-on bank account, not a named bank account, but maybe you get a routing number and account number attached to the wallet where you can now receive um maybe ACH or wires. Um but because it's a virtual account, you cannot do things like pay your rent because there is no ACH pool functionality. Um that's like a big thing that uh us having um access to and being able to provide banking services through our sponsor bank um let it it enables. Um and that's something we really thought about from the start because when we first started Brookwell, we thought about um you know what what is the real what's the real point of giving people the benefits of stable coins if we aren't their primary financial relationship? Um if they still need to use something else to pay rent, then the maximum utility we can have is like maybe replacing everything they do with their current cards. Uh by the same time, you know, American Express and all these card companies have uh very, very good cash back and things like this. So you're you're never really going to um be the best card from a commoditized perspective unless you're like losing money by offering 3% cash back or something like this, right? So um I think on the on the within the neobank kind of world, there's these different layers of functionality and abstraction. Um I think across the stack, it's become a lot easier to do everything all the way up to having like virtual accounts with a wallet and a card where you're essentially just slapping some APIs together. Um but the the the the the the con that comes with this pro is because you don't own any of the infrastructure, um, the provider that you use can kind of completely ruin your whole business. Um, you know, I've I've heard horror stories of people who've built neobanks for a specific purpose and then uh some arbitrary limit, like, oh, we only let you have a thousand wallets, and then they launch, they they blow up, and then all of a sudden they get taken down and their product is gone because um someone deemed that they're that they uh hit some arbitrary limit that because they aren't providing infrastructure with the people who are who are under the hood. Um it's all it's all abstracted away. And so uh and another con of this is of course, like it's more expensive. If you go find people who are willing to do um every foreign exchange, they're gonna charge you a ton of money because what they're doing is just establishing relationships with all these individual entities who can do it for much cheaper. So, yes, it's easier to go with one API that aggregates everything. Um, but I think across the whole like neobank world right now, we're seeing people realize the importance of getting deeper into the stack and establishing their own relationships with some of the infrastructure that they use because it's cheaper, um, maybe a little bit more difficult on the implementation side, but long term it's it's it's definitely more sustainable. Um I went a little bit all over the place there, but but the core answer to your question is that many of the pieces it takes to build a neobank have become uh very uh very uh accessible.

Dante Reminick 32:17

Yeah. Is this legal?

Ravi Riley 32:21

Which which piece? I want to say yes.

Dante Reminick 32:25

I think

Compliance And Stablecoin Regulation

Dante Reminick 32:26

a lot of the times people are hesitant about stable coins because they view the stablecoin stack as a a fragile regulatory arbitrage, right? Is is that the case with Brookwell and a lot of these neo banks, or is you know everything that you're doing 100% you know just as solid as a traditional financial institution from a compliance perspective?

Ravi Riley 32:50

So everything Brookwell's doing is just as solid. We're very much uh buttoned up when it comes to compliance, and we've always taken a compliance first approach, uh, which is why we didn't go just build like a wallet with a card. We took the the hard path of trying to find a bank who'd be willing to take stable coins in the flow of funds. Um from a legal perspective, uh, you know, I'm no lawyer, so I'm I'm not an expert there, but with all the latest in regulations around the Genius Act and hopefully the Clarity Act, um, we've kind of got a lot of clarity when it comes to the ambiguous uh areas of what is and is not a stable coin, what is and is not allowed with stable coins um around yield or around different activities. So I think another reason why neobanks have kind of exploded is because um these ambiguities were uh in a way like a ambiguity tax on people who are building in the space.

Dante Reminick 33:45

And now that that ambiguity is a risk adjustment.

Ravi Riley 33:48

Right. And so now that that's largely gone, um, we're see this is why we're seeing banks and regulated institutions start to adopt uh stables as a payment rail because it is now regulated as one. Um so I don't know what other neo banks are doing, but certainly we're we're following uh the regulations very closely and making sure that everything we're doing is uh is compliance first. Um I would say generally the idea of having like stable coins and a car that spends them is is uh never really gonna be like illegal um because stables are now treated as a payment rail. Um if anything, you know, in certain jurisdictions, uh stables are viewed as an asset with a cost basis of just one dollar, um, which is maybe a little bit more annoying because people have to report their ta their cost basis, but um that doesn't make the the stablecoin as a payment rail any less uh useful.

Dante Reminick 34:45

Got it. Got it. So

What It Takes For A Neobank To Win

Dante Reminick 34:47

we've talked a lot about how these neobanks are popping up everywhere, not just in this episode. It's sort of been a theme throughout the entire show. What does it take for a neo bank to win? Like why why is one neobank gonna be better than all the rest?

Ravi Riley 35:02

I think it really comes down to uh primacy. And what I mean by that is uh being not just like a cool front end and a nice user experience, um, but being the trusted primary account uh for maybe a clear niche or a specific group of people that's also got the unit economics to not uh by default like die when they scale. Um I think I in my opinion, because I'm biased and this is the path we're going down, I think having enough regulated infrastructure to safely scale in a compliant way is also very important. Um, but I think at the core, you really need to be uh someone's primary financial relationship.

Dante Reminick 35:46

That's that's huge. And I imagine you guys are like that's that seems to be your number one focus here is how can we become the primary financial relationship for all of our customers?

Ravi Riley 35:59

Absolutely. And I think for for consumers especially, you know, this varies a lot. What does this what does this mean? What does it mean to be someone's primary financial relationship? I think with consumers, it's pretty easy to explain. It's like, hey, this is the bank that I use for everything. Um my my paycheck comes in here, I my rent gets paid out, uh, my my credit cards, my other bills, anything recurring is from one account. Most people still use, you know, whatever they first opened when they were 18, uh, maybe a local branch near their house, right? Like this is the standard. Um, and there's a lot of friction for for businesses and for people to move their primary financial relationship, which is why banks will give you like a $500 bonus when you sign up with a new account and and deposit your paycheck. It's because uh they're they're not sticky. It's yeah, it's sticky and the cac is super high. Um, and so this is this is clearly very important for for these big banks, and they've done this very well. Um, so I think in many ways, you need to not only be like 10 times better than uh than whatever you're competing with to establish that financial relationship, you also need to make it easy for people to switch if they have something else. And this is neo bank dependent if your customers already have uh something else that they use or not. Um in many cases with with modern sort of stablecoin neobanks, the answer might be not, and you might be the first, and then that's great. You can very easily establish this primacy. Um, but I think for something like what we're doing, we we we don't expect all of our users to not have a bank account, right? This is this is crazy to assume. Uh everyone has at the very least, like their their chase or their Wells Fargo or their Bank of America that they opened when they were when they were little. Um and so I think the the the things we're focused on there is how can we make it really easy for people to switch um their recurring inflows and outflows from their account um and make that onboarding experience uh engaging and rewarding to people so it's not like a tour. Um I remember I uh you know I don't really have any loyalty to my bank, so I'm the kind of guy who will find like the highest checking account yield and like move everything over. And uh I remember I think a couple of years ago, Wealthfront had this crazy deal where you would sign up and you'd get this super high uh APY. And then uh I I onboarded, I deposited a thousand bucks, and then that was it. And then the next step was like, hey, we want you to buy stocks. And I was like, Oh, what do I do? I have to manually like move all these things over, and this is this is a terrible UX. So that's something we're very much thinking about for our target demographic is uh for primacy, how do you make it really, really, really a great experience for people to want to and be able to uh execute on switching to you as their primary financial relationship.

Dante Reminick 38:49

Last

Adoption Timelines And Tokenized Deposits

Dante Reminick 38:50

question for you, Ravi. Let's talk timelines. I think you know, when you look at an industry like AI, things are moving so, so, so, so, so fast, right? Can't keep up with it. Couldn't imagine you know what happens on like a three-month time horizon. In banking, it's very, very different, right? It takes time to get the right sponsor bank, it takes time to get an O CC charter, it takes time to build these types of trust relationships.

Ravi Riley 39:16

Walk me through your predictions on you know stablecoin adoption timelines, neo bank adoption timelines, what all this is gonna look like and when I think that we're already seeing a lot more uh on on the regulated side and the sort of stablecoin neobank side. I very much think we're in the year of the the stablecoin neobank, we're seeing a lot of um explosive adoption across the world where uh people are are leveraging these these products. Um I do think that uh people underestimate the speed at which uh the the big the big fintechs of the world and the regulated institutions of the world are adopting stable coins as a payment rail or as a method of getting people deposit accounts that are not uh like named bank accounts. Like it's it's happening fast and it's happening soon. Um I think that we're gonna see these big companies um like Ramp and Brex and maybe Mercury um start to offer things like stablecoin only accounts where someone's KYB or KYC process uh does not go to their sponsor bank at all. And maybe they'll offer their expense management tools or whatever it may be that makes their Neo Bank special, where the primary account is actually just a stablecoin wallet. Um and I think people underestimate how uh how these institutions are viewing um stables and how they're rapidly adopting and and pushing um prototypes and making sure that they get to be part of the Neo Bank stablecoin explosion too. Um I think on the banking side, something that people are uh kind of talking about, but uh maybe a little bit a little bit weary about is tokenized deposits. Um but I think really quickly. Yeah, absolutely. So stablecoin is essentially like a um a tokenized deposit at a specific bank, meaning if I give Dante, if Dante is a circle and I give Dante a dollar, he gives me back a stable coin, Dante is holding that dollar. Um, but it's with his banking partner, and he's making the money off the dollar. And so, you know, if if I'm a different a different bank, uh then I want to make money on my dollars. Um I don't want to accept Dante's stable coin because I make no money off of it, and banks are in the business of you know making money off of deposits. And so um a tokenized deposit is essentially uh kind of the opposite of a stable coin. It's like a fully centralized thing controlled and issued by the bank, but they're willing to accept it because uh they're willing to accept it as a deposit because um it's something that they are able to uh see as equivalent to like a regular dollar fiat deposit at their bank account, uh or at their bank rather. So um, you know, whether whether you think this is a good thing or a bad thing, that aside, I think we're gonna see uh we're gonna see banks go from maybe prototypes to something more functional um over the next couple years with tokenized deposits. We're gonna see the adoption of stables as a payment rail on the banking side also increase. Um, I think Erebor is pioneering this, but we're gonna see other regular institutions um begin to accept this as a payment rail as well. So across the board, these are all great things for the world of neo bank stable coins. Um and I think we're also gonna see on the issuance side more neo banks who get that adoption and have that primary relationship with their users issue their own stable coins because you know if they are uh offering accounts on a specific stablecoin, if they abstract it away well enough, the user doesn't even need to know that it's uh not USDC. Um and now they're like the bank also earning on you know the deposits uh that they offer to their customers. And so uh I think on on all of these fronts, we're gonna see very rapid progress. And I think um there hasn't really been a clear, like king-made neo bank uh in the stablecoin world. So I think it's gonna be us. Um but who whoever we do see take that path is gonna be uh wanting to own more of the stack uh on the issuance side too.

Dante Reminick 43:43

Amazing.

Closing

Dante Reminick 43:44

Amazing. Rebic, this has been a very, very insightful conversation for me personally. Uh I hope that all the banking nerds out there also found this equally as exciting. We're gonna uh have to bring you back on and check back in with you gradually over time as as Brookwell continues to launch and expand and everything like that. But I appreciate the time, my friend. Um, for our guests, like I said, and I hope you also found value in this. As always, go and check us out wherever you're listening to your podcasts and uh stay stable.