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Inside the Rise of the Stablecoin Neobank with Brookwell · The Stable Pulse

• 0:08
  Intro: Stablecoin issue of debut right here at the Name Deck Today.
• 0:13
  Dante Reminick: So we have talked about NeoBanks a few different times on this show, but we haven't talked to a neobank yet.
• 0:21
  Dante Reminick: So today we're gonna do that.
• 0:22
  Dante Reminick: Ravi, welcome to the show.
• 0:24
  Dante Reminick: We're gonna talk all things banking, all things neobanks, all things, you know, why banking needs stable coins and everything like that.
• 0:32
  Dante Reminick: Very, very excited to have you on.
• 0:34
  Dante Reminick: For the listeners who have been following the show, you know that we always start off with a segment that we call braggadocious.
• 0:41
  Dante Reminick: 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.
• 0:48
  Dante Reminick: But we want you to sort of leave humility at the door and brag about yourself, brag about Brookwell as as much as possible.
• 0:55
  Dante Reminick: So, Ravi, thanks for coming on the show.
• 0:57
  Dante Reminick: I'm excited to hear you brag, my friend.
• 0:59
  Dante Reminick: Go for it.
• 1:00
  Ravi Riley: All right.
• 1:01
  Ravi Riley: Not not my strong suit bragging about myself, but I'll do it.
• 1:03
  Ravi Riley: Too bad.
• 1:04
  Dante Reminick: Gotta do it anyways.
• 1:05
  Ravi Riley: Yeah, yeah, yeah.
• 1:06
  Ravi Riley: Um, so yeah, my my name is Ravi.
• 1:08
  Ravi Riley: And uh let's see, I've been building in the sort of crypto uh payments space for the last five years.
• 1:16
  Ravi Riley: 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.
• 1:27
  Ravi Riley: 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.
• 1:50
  Ravi Riley: 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.
• 2:11
  Ravi Riley: 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.
• 2:23
  Ravi Riley: 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.
• 2:34
  Ravi Riley: So give you all the functionality you would expect.
• 2:37
  Ravi Riley: 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.
• 2:52
  Dante Reminick: Awesome.
• 2:52
  Dante Reminick: 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.
• 3:00
  Dante Reminick: Let's sort of even take a step back from there.
• 3:03
  Dante Reminick: 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?
• 3:13
  Ravi Riley: That's a great question.
• 3:14
  Ravi Riley: 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.
• 3:26
  Ravi Riley: 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.
• 3:36
  Ravi Riley: Um and we're kind of seeing this definition broaden from everything to deposit accounts to like financial services.
• 3:44
  Ravi Riley: 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.
• 4:01
  Ravi Riley: 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.
• 4:12
  Ravi Riley: 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.
• 4:31
  Dante Reminick: So what does that mean pragmatically though?
• 4:33
  Dante Reminick: 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.
• 4:41
  Dante Reminick: Why do I need a neo bank?
• 4:44
  Dante Reminick: Why can't I go to JP Morgan or to Chase or to Wells Fargo and get all of these things done with them?
• 4:52
  Ravi Riley: It's a great question.
• 4:53
  Ravi Riley: Yeah.
• 4:53
  Ravi Riley: So I think there's really a few answers here, um, but it it depends on what the neo bank's structure is.
• 5:02
  Ravi Riley: So there are, of course, like regulated industries where a traditional bank with regulated banking infrastructure might not be able to serve those industries.
• 5:10
  Ravi Riley: 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.
• 5:32
  Ravi Riley: 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.
• 5:44
  Ravi Riley: Um I might make the analogy of like a chef's knife versus a Swiss Army knife.
• 5:48
  Ravi Riley: 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.
• 6:06
  Ravi Riley: Um one example of this is actually another company building on on seismic.
• 6:11
  Ravi Riley: Um they're building for import-export businesses.
• 6:14
  Ravi Riley: 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.
• 6:32
  Ravi Riley: 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.
• 6:50
  Dante Reminick: Yeah, interesting.
• 6:51
  Dante Reminick: And I think it's important to note that neobanks inherently are not fighting directly against these big banks.
• 6:58
  Dante Reminick: 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.
• 7:10
  Dante Reminick: I know that you're experiencing this firsthand, building out your own neo bank from the ground up.
• 7:16
  Dante Reminick: 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?
• 7:29
  Ravi Riley: 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.
• 7:40
  Ravi Riley: Uh when we first started Brookwell, no one was really talking about uh crypto neobanks.
• 7:45
  Ravi Riley: They weren't really a thing.
• 7:46
  Ravi Riley: And now uh everyone and their mom is kind of starting a neo bank, right?
• 7:50
  Ravi Riley: Um I think that there's a few big pieces um that are helping with different parts of the neobank stack.
• 7:57
  Ravi Riley: We're seeing a lot of big asset managers start to do tokenization of their money markets, T-bills.
• 8:04
  Ravi Riley: So this brings like very easy access to high-quality RWAs that are real-world assets for the audience.
• 8:11
  Ravi Riley: 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.
• 8:21
  Ravi Riley: Um, we're seeing a lot of activity around that.
• 8:24
  Ravi Riley: 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.
• 8:37
  Ravi Riley: And uh all sorts of other kind of infra pieces that I think are aligned with people building neobanks.
• 8:46
  Ravi Riley: 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.
• 8:54
  Ravi Riley: 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.
• 9:05
  Ravi Riley: And I think that uh playing nice or even having interoperability between on-chain finance and traditional finance is super important.
• 9:14
  Ravi Riley: 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.
• 9:23
  Ravi Riley: 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.
• 9:40
  Dante Reminick: Yeah, that's that's super interesting.
• 9:42
  Dante Reminick: 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?
• 10:03
  Dante Reminick: Right?
• 10:03
  Dante Reminick: Why do these traditional organizations still need to exist?
• 10:06
  Dante Reminick: What role do they play?
• 10:08
  Ravi Riley: All of that fun stuff well, uh I would say getting a charter is hard.
• 10:15
  Ravi Riley: We're seeing it get uh maybe easier, and a lot of uh the floodgates have been opened, so to speak.
• 10:20
  Ravi Riley: Like more people are getting access to building real banks and not just access to sponsor banks.
• 10:27
  Ravi Riley: Um, but I think that uh that said, it's still a huge undertaking, of course.
• 10:34
  Ravi Riley: 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.
• 10:44
  Ravi Riley: 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.
• 10:58
  Ravi Riley: 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.
• 11:07
  Ravi Riley: And so uh I believe that uh managing like risk and compliance is still a huge, uh, huge, hugely important endeavor.
• 11:16
  Ravi Riley: 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.
• 11:27
  Ravi Riley: 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?
• 11:44
  Dante Reminick: We just threw on a lot of jargon, right?
• 11:46
  Dante Reminick: We talked about bank charters, the OCC, um, you know, we're sort of leaning towards virtual accounts and FBOs.
• 11:54
  Dante Reminick: 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?
• 12:06
  Dante Reminick: Like, you know, explain to me like I'm five.
• 12:09
  Ravi Riley: Absolutely.
• 12:10
  Ravi Riley: Uh this is something that I think uh is is super important.
• 12:15
  Ravi Riley: The the Neobank is uh in in many ways multiple layers of abstraction down from like a bank bank.
• 12:24
  Ravi Riley: So uh starting at the Neobank layer, Neo Bank is kind of uh a wrapper in many ways on other people's infrastructure.
• 12:34
  Ravi Riley: So a neobank might want to serve a specific demographic.
• 12:37
  Ravi Riley: Maybe that demographic wants FX, maybe they want loans, maybe they want banking services.
• 12:42
  Ravi Riley: 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.
• 12:54
  Ravi Riley: 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.
• 13:03
  Ravi Riley: Um, but they're more so kind of at the application layer.
• 13:07
  Ravi Riley: Um maybe one step down from there, you have infrastructure providers.
• 13:11
  Ravi Riley: 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.
• 13:24
  Ravi Riley: 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.
• 13:33
  Ravi Riley: 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.
• 13:52
  Ravi Riley: And there's a reason that neo banks can't call themselves banks.
• 13:56
  Ravi Riley: It's because um they aren't regulated as one.
• 13:59
  Ravi Riley: 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.
• 14:08
  Ravi Riley: 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.
• 14:30
  Ravi Riley: Um so as you move down the stack, you get deeper into compliance and regulatory requirements.
• 14:37
  Ravi Riley: You also uh get deeper into access to things like FDIC insurance um and like lending and other bank-only bank services.
• 14:47
  Ravi Riley: Hopefully that avoids some of the jargon.
• 14:51
  Dante Reminick: Yes.
• 14:51
  Dante Reminick: I want to synthesize this really quickly because I think that we are meandering around two very important points.
• 15:00
  Dante Reminick: 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.
• 15:14
  Dante Reminick: That's sort of one part of this.
• 15:17
  Dante Reminick: 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.
• 15:38
  Dante Reminick: So given that you have these two parties, right?
• 15:41
  Dante Reminick: 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?
• 15:55
  Dante Reminick: 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?
• 16:05
  Dante Reminick: 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?
• 16:12
  Dante Reminick: What where does this all sort of lead to?
• 16:17
  Ravi Riley: I think all of the above.
• 16:18
  Ravi Riley: We're gonna see both, and we're already seeing both.
• 16:21
  Ravi Riley: 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.
• 16:44
  Ravi Riley: So it's not a tokenized deposit, it's it's a stablecoin, and these are these are separate.
• 16:48
  Ravi Riley: And so uh even the kind of pioneers of stablecoin adoption like Erebor, they're uh not really holding the stable coins.
• 16:58
  Ravi Riley: 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.
• 17:06
  Ravi Riley: Because again, you know, it's very different than them getting a deposit in in their bank.
• 17:11
  Ravi Riley: 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.
• 17:21
  Ravi Riley: 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.
• 17:34
  Ravi Riley: 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.
• 17:53
  Ravi Riley: 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.
• 18:06
  Ravi Riley: 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.
• 18:25
  Ravi Riley: Um I think Mercury is a great example of this.
• 18:27
  Ravi Riley: 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.
• 18:36
  Ravi Riley: 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.
• 18:53
  Ravi Riley: 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.
• 19:07
  Dante Reminick: Love it.
• 19:08
  Dante Reminick: And we've been talking about neobanks and and banking broadly.
• 19:13
  Dante Reminick: Let's talk about Brookwell now.
• 19:15
  Dante Reminick: Where do you guys fall on this spectrum?
• 19:16
  Dante Reminick: How are you guys building this out?
• 19:18
  Dante Reminick: Tell me everything.
• 19:20
  Ravi Riley: 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.
• 19:37
  Ravi Riley: So Brookwell uh lets you have access to a uh checking account.
• 19:44
  Ravi Riley: That's an that's a named FDIC insured checking account from um our sponsor bank, which is Erebor.
• 19:49
  Ravi Riley: And we pair that with a stablecoin sort of non-custodial wallet that lets you do things like access DeFi yield.
• 19:57
  Ravi Riley: Um and of course, this is not FDIC insured because it's it's stablecoins and uh not deposits at a bank.
• 20:03
  Ravi Riley: 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.
• 20:19
  Ravi Riley: 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.
• 20:34
  Ravi Riley: I can't pay my rent with stables, unfortunately.
• 20:37
  Ravi Riley: Um and we're seeing a lot of areas where people are leveraging stables as a better, better money, better payment rail.
• 20:46
  Ravi Riley: Um, but the last mile problem is is not necessarily met.
• 20:49
  Ravi Riley: 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?
• 21:03
  Ravi Riley: Uh you could you could pay your people and they have to wait three days to get their paycheck because ACH is slow.
• 21:09
  Ravi Riley: 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.
• 21:25
  Ravi Riley: 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.
• 21:47
  Ravi Riley: That that completely solves this.
• 21:49
  Ravi Riley: 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.
• 21:59
  Ravi Riley: Really knowing uh what a stable coin is.
• 22:02
  Ravi Riley: Um so I I can I can uh yap about Brookwell all day, but um one of those benefits is actually FX.
• 22:10
  Ravi Riley: So uh we can do like stable coin sandwich stuff, um, meaning pause.
• 22:15
  Ravi Riley: What is that?
• 22:15
  Dante Reminick: Yeah.
• 22:16
  Ravi Riley: Yeah, so that stable coin sandwich is sort of the the term to describe generally um how to do cheaper exchange between fiat currencies.
• 22:24
  Ravi Riley: 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.
• 22:31
  Ravi Riley: 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.
• 22:42
  Ravi Riley: I send them to Dante.
• 22:43
  Ravi Riley: 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.
• 22:57
  Ravi Riley: 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.
• 23:07
  Ravi Riley: 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.
• 23:23
  Ravi Riley: Um that's pretty cool.
• 23:25
  Ravi Riley: Uh and then also any digital asset that we can support.
• 23:28
  Ravi Riley: 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.
• 23:47
  Dante Reminick: Interesting.
• 23:47
  Dante Reminick: So me personally, I live in the US, I bank at a traditional financial institution.
• 23:54
  Dante Reminick: What type of people or companies would need to bank at a neobank?
• 24:03
  Dante Reminick: 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?
• 24:13
  Ravi Riley: Yeah, this is this is a great question.
• 24:15
  Ravi Riley: 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.
• 24:36
  Ravi Riley: 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.
• 24:52
  Ravi Riley: And so off the bat, from the commoditized angle, we we have a clearly better offering there.
• 24:58
  Ravi Riley: But who needs Brookwell right now?
• 25:01
  Ravi Riley: 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.
• 25:22
  Ravi Riley: 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.
• 25:39
  Ravi Riley: 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.
• 26:03
  Ravi Riley: Um and the current rails are really lacking.
• 26:06
  Ravi Riley: 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.
• 26:17
  Ravi Riley: 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.
• 26:55
  Ravi Riley: 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.
• 27:06
  Ravi Riley: Interesting.
• 27:09
  Dante Reminick: Super, super interesting.
• 27:10
  Dante Reminick: You mentioned earlier in the podcast that there are a ton of neobanks popping up.
• 27:16
  Dante Reminick: Why do you think there's so much supply increase in the amount of neobanks that are popping up?
• 27:23
  Dante Reminick: And do you think all of them are needed?
• 27:28
  Ravi Riley: I would say supply increase is definitely because the infrastructure needed to build a neo bank has become uh pretty heavily commoditized.
• 27:36
  Ravi Riley: 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.
• 27:56
  Ravi Riley: 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.
• 28:06
  Dante Reminick: Um is that what Brookwell is, or do you guys take it further than that?
• 28:11
  Ravi Riley: 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.
• 28:23
  Ravi Riley: 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.
• 28:34
  Ravi Riley: Um we can do uh paying off your credit cards with ACH pools.
• 28:38
  Ravi Riley: 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.
• 28:46
  Ravi Riley: So you can see on the neo bank stack the the most basic thing is a wallet with a card.
• 28:51
  Ravi Riley: 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.
• 29:12
  Ravi Riley: Um but because it's a virtual account, you cannot do things like pay your rent because there is no ACH pool functionality.
• 29:20
  Ravi Riley: 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.
• 29:30
  Ravi Riley: 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?
• 29:49
  Ravi Riley: 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.
• 29:59
  Ravi Riley: 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.
• 30:06
  Ravi Riley: 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?
• 30:17
  Ravi Riley: So um I think on the on the within the neobank kind of world, there's these different layers of functionality and abstraction.
• 30:27
  Ravi Riley: 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.
• 30:38
  Ravi Riley: 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.
• 30:51
  Ravi Riley: 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.
• 31:18
  Ravi Riley: Um it's all it's all abstracted away.
• 31:20
  Ravi Riley: And so uh and another con of this is of course, like it's more expensive.
• 31:24
  Ravi Riley: 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.
• 31:38
  Ravi Riley: So, yes, it's easier to go with one API that aggregates everything.
• 31:42
  Ravi Riley: 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.
• 32:03
  Ravi Riley: 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.
• 32:17
  Dante Reminick: Yeah.
• 32:18
  Dante Reminick: Is this legal?
• 32:21
  Ravi Riley: Which which piece?
• 32:22
  Ravi Riley: I want to say yes.
• 32:25
  Dante Reminick: I think a lot of the times people are hesitant about stable coins because they view the stablecoin stack as a a fragile regulatory arbitrage, right?
• 32:37
  Dante Reminick: 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?
• 32:50
  Ravi Riley: So everything Brookwell's doing is just as solid.
• 32:52
  Ravi Riley: 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.
• 33:02
  Ravi Riley: 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.
• 33:08
  Ravi Riley: 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.
• 33:33
  Ravi Riley: 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.
• 33:45
  Dante Reminick: And now that that ambiguity is a risk adjustment.
• 33:48
  Ravi Riley: Right.
• 33:48
  Ravi Riley: 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.
• 34:01
  Ravi Riley: 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.
• 34:12
  Ravi Riley: 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.
• 34:23
  Ravi Riley: 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.
• 34:45
  Dante Reminick: Got it.
• 34:46
  Dante Reminick: Got it.
• 34:46
  Dante Reminick: So we've talked a lot about how these neobanks are popping up everywhere, not just in this episode.
• 34:50
  Dante Reminick: It's sort of been a theme throughout the entire show.
• 34:53
  Dante Reminick: What does it take for a neo bank to win?
• 34:56
  Dante Reminick: Like why why is one neobank gonna be better than all the rest?
• 35:02
  Ravi Riley: I think it really comes down to uh primacy.
• 35:06
  Ravi Riley: 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.
• 35:26
  Ravi Riley: 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.
• 35:38
  Ravi Riley: Um, but I think at the core, you really need to be uh someone's primary financial relationship.
• 35:46
  Dante Reminick: That's that's huge.
• 35:48
  Dante Reminick: 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?
• 35:59
  Ravi Riley: Absolutely.
• 36:00
  Ravi Riley: And I think for for consumers especially, you know, this varies a lot.
• 36:05
  Ravi Riley: What does this what does this mean?
• 36:06
  Ravi Riley: What does it mean to be someone's primary financial relationship?
• 36:09
  Ravi Riley: I think with consumers, it's pretty easy to explain.
• 36:11
  Ravi Riley: It's like, hey, this is the bank that I use for everything.
• 36:13
  Ravi Riley: 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.
• 36:21
  Ravi Riley: Most people still use, you know, whatever they first opened when they were 18, uh, maybe a local branch near their house, right?
• 36:28
  Ravi Riley: Like this is the standard.
• 36:30
  Ravi Riley: 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.
• 36:45
  Ravi Riley: It's because uh they're they're not sticky.
• 36:47
  Ravi Riley: It's yeah, it's sticky and the cac is super high.
• 36:50
  Ravi Riley: Um, and so this is this is clearly very important for for these big banks, and they've done this very well.
• 36:56
  Ravi Riley: 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.
• 37:10
  Ravi Riley: And this is neo bank dependent if your customers already have uh something else that they use or not.
• 37:16
  Ravi Riley: 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.
• 37:23
  Ravi Riley: You can very easily establish this primacy.
• 37:26
  Ravi Riley: 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?
• 37:32
  Ravi Riley: This is this is crazy to assume.
• 37:34
  Ravi Riley: 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.
• 37:42
  Ravi Riley: 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.
• 38:00
  Ravi Riley: 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.
• 38:11
  Ravi Riley: 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.
• 38:18
  Ravi Riley: And then uh I I onboarded, I deposited a thousand bucks, and then that was it.
• 38:24
  Ravi Riley: And then the next step was like, hey, we want you to buy stocks.
• 38:26
  Ravi Riley: And I was like, Oh, what do I do?
• 38:27
  Ravi Riley: I have to manually like move all these things over, and this is this is a terrible UX.
• 38:32
  Ravi Riley: 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.
• 38:49
  Dante Reminick: Last question for you, Ravi.
• 38:50
  Dante Reminick: Let's talk timelines.
• 38:52
  Dante Reminick: I think you know, when you look at an industry like AI, things are moving so, so, so, so, so fast, right?
• 38:58
  Dante Reminick: Can't keep up with it.
• 38:59
  Dante Reminick: Couldn't imagine you know what happens on like a three-month time horizon.
• 39:04
  Dante Reminick: In banking, it's very, very different, right?
• 39:07
  Dante Reminick: 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.
• 39:16
  Ravi Riley: 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.
• 39:39
  Ravi Riley: 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.
• 39:52
  Ravi Riley: 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.
• 40:12
  Ravi Riley: Like it's it's happening fast and it's happening soon.
• 40:16
  Ravi Riley: 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.
• 40:33
  Ravi Riley: 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.
• 40:43
  Ravi Riley: 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.
• 40:59
  Ravi Riley: 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.
• 41:11
  Ravi Riley: Um but I think really quickly.
• 41:14
  Ravi Riley: Yeah, absolutely.
• 41:15
  Ravi Riley: 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.
• 41:28
  Ravi Riley: Um, but it's with his banking partner, and he's making the money off the dollar.
• 41:34
  Ravi Riley: And so, you know, if if I'm a different a different bank, uh then I want to make money on my dollars.
• 41:40
  Ravi Riley: 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.
• 41:49
  Ravi Riley: And so um a tokenized deposit is essentially uh kind of the opposite of a stable coin.
• 41:56
  Ravi Riley: 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.
• 42:13
  Ravi Riley: 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.
• 42:29
  Ravi Riley: We're gonna see the adoption of stables as a payment rail on the banking side also increase.
• 42:35
  Ravi Riley: 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.
• 42:44
  Ravi Riley: So across the board, these are all great things for the world of neo bank stable coins.
• 42:49
  Ravi Riley: 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.
• 43:11
  Ravi Riley: Um and now they're like the bank also earning on you know the deposits uh that they offer to their customers.
• 43:18
  Ravi Riley: And so uh I think on on all of these fronts, we're gonna see very rapid progress.
• 43:24
  Ravi Riley: And I think um there hasn't really been a clear, like king-made neo bank uh in the stablecoin world.
• 43:32
  Ravi Riley: So I think it's gonna be us.
• 43:34
  Ravi Riley: 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.
• 43:43
  Dante Reminick: Amazing.
• 43:44
  Dante Reminick: Amazing.
• 43:44
  Dante Reminick: Rebic, this has been a very, very insightful conversation for me personally.
• 43:49
  Dante Reminick: Uh I hope that all the banking nerds out there also found this equally as exciting.
• 43:53
  Dante Reminick: 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.
• 44:00
  Dante Reminick: But I appreciate the time, my friend.
• 44:02
  Dante Reminick: Um, for our guests, like I said, and I hope you also found value in this.
• 44:05
  Dante Reminick: As always, go and check us out wherever you're listening to your podcasts and uh stay stable.