How Blend Lets Any Neobank Offer DeFi Yield

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Alright. Alright. Jamie, Manny. Great to meet y'all. How's it going? Welcome to Stabilize Live.

Thank you. Thanks for having us. 100%.

Awesome. Well, this is a this is our NEO segment. Definitely focused on the the world of modern banking. We focus primarily on the applications themselves. You're a little step farther down in the stack. So maybe give us the introduction. What are you building at Blend? Where do you guys fit into, especially in the the yield conversation? Sure. Jamie, I'll let you who who's more passionate about it? Who wants to take the mic?

Okay. Sounds good. Yeah. So Blend is effectively the b two b solution that connects these Neo Finance apps as we call them. I think Neo Bank is a really cool term. I think Neo Finance expands so much further, which is really interesting. Every every product wants to integrate vertically with these yield earn pages. So we connect neofinance apps to yeah. So they're they're underlying compliant providers.

So your yields, your pay, your ramp, your your spend, anything where the Neo Finance app has to go out and stake a legal obligation and and facilitate the information transfer.

Everything there is where Blend lives, and that's what we try to alleviate for these Neo Finance apps. I'm gonna pop this side up here as we kind of get to know Blend a little bit. When you're explaining what you're building in the context of Neo Finance, how are what are some of these, like, positioning, you know, use cases or metaphors that you use, visualizations you use to kind of describe, hey. Here's where we sit.

This account layer terminology that we're talking about, like, how do you get people's minds around what makes Blend unique? Yeah. The way the way we describe it is that we the account layer or where the Neo Finance product, it, plugs in is always gonna be on the account. So it doesn't matter if you're thinking about on ramps, cards, yield. We wanna plug we wanna help you build that, and we wanna build it in a journey where we don't disrupt your current flow.

So if you're using Turnkey, Cribby, Portal, all of these can be can work synonymously with Splend. And what we with Splend is we try to use a traditional finance type of terminology because the folks that we're targeting are from web two to web three, but also care about the compliance and all the legality around using such a new product, the Stablecoin product. And so the era that we live in is compliance. So how do we do that?

Every single account on Blend is singly managed, so none of the money on the account level gets pooled together, which is kind of an interesting concept because, you know, Web two thing, this is a common like, you wouldn't want your money to be mixed with the money at a bank account. Right? This is a common compliance stuff. But if we do this in Web three, it was kinda like, this is kind of an interesting concept.

And then we go further from when you plug in, and we can talk about yield first because that's kind of an obvious thing, but cards, on ramps, all these other issuers, let's say, the Frank Bill Templetons of the world, the Agora Finances of the world, these are these permissioned, like, yield products. They have their own compliance, like, needs, and that come from, like, OFX screening to open sanction screening to transaction monitoring.

And they need systems that are from the accounts layer that can flag anomalies to them. And neobanks also want a way so that they don't need to build all those up. Because the products that exist right now, because we've been so chain heavy, they're all meant for chains. They're not meant for a neobank stack. So this is where Blend comes in.

And we let simple things like if The U if the neobank is doing k KYC, we allow their KYC mappings to flow through Blend, and the issuer side of it can accept these KYC's through token sharing. We help with the compliance stuff, and it all kinda melds together. Yeah. As Simon says, I'm just reading this. The every neobank dies the same way.

Yield deals take a quarter to negotiate, ramp fees, eat your margin, wallet info. I I totally agree with this. It's its own road map. You You wanted to launch a product or staffing and infrastructure team instead. Where did where did some of this awareness from like, that is a a lot of, like, really deep awareness of the pain and the problem that these builders are feeling. Like, where where did that come from for you both? Yeah. I mean, I started a my career was informal quantitative.

And then I I we Manny and I, we both met each other at across in Ooma where we were building bridges. So we were effectively working across billions of dollars of user flows for for years, for a number of years. And when we started Blend, we realized originally we had the naive thought, let's start our own neobank. And we took all of the interoperability context between what we've been doing for years. And I I took my formal understanding and knowledge of traditional finance.

And when we merge it together, we realized we were not so much building a neobank. We were actually building, for lack of a better word. We were building the framework that existed and then being a neobank on top. So we went through all the pain of integrating modules. We went through all the pain of having these individual bilateral relationships with all of our downstream providers. And at some point we realized we were already doing this. We would have to do this.

And we had the wherewithal to recognize that all neobags effectively have to do this. And then, then we kind of came to this conclusion that we're interoperability builders. Interoperability extends to just beyond bridging. It extends to how financial products and institutions touch regulated products. And so that was where that's really where blend comes from.

This mindset that we saw a bunch of money move, but at the same time, we wanted to make sure it was all safe and everything was cognizant of the fact that regulations, they change over time. And we wanna make sure that our clients are they're coloring in the lights. Yep. Yeah. What do you think the other things alright. Go ahead, Manny. Go ahead, Manny. No. No. Go ahead.

I was just gonna say that the other category, like, of a subcategory that we're inventing is, like, interoperability of blockchain with traditional clients. Because we are interop builders and that layer of interrupting from blockchain to traditional finance. The core missing piece of this is compliance. Right? Who is gonna do the compliance stuff? Who's gonna make sure that it all fits together, and who flags it?

Because we we know that, like, traditional finance is not gonna be left out of the picture, and they have rules and regulations. And and neobanks on the other side are want access to the tokenized permissioned actors, but they don't have six to eight weeks of sitting in compliance held to figure it all out. And they don't wanna negotiate that they wanna win a product that will work further for them and their behalf. Yeah. I was gonna ask, where do you think neobanks

get yield wrong? Because I think we've seen for a while kind of this apprehension, especially when it comes to stable coin re regulation of passing yield on to consumers. There's what they may get wrong on the side of how you know, where do we allocate their deposits to generate yield? Is it safe? Is it compliant? Are we pulling together their funds? So but we've also seen this trend recently, more and more neobanks flipping on the switch of, actually, we're gonna risk it. Our users want yields.

They're using us like a bank. You don't wanna go to a bank and not get yield. So how has this conversation evolved to kind of flip this switch? Yeah. I mean, something to consider.

Regulation globally is not going away. It's only increasing. And I think with DeFi, we're all in, as you said it yourself, people are taking the risk. Right? It's very it's very breaks off.

And I think the question, if you're considering these yield products, it really is in two years, if you are the founder of a FinTech or a neobank or a neofinance app, and you are confident you're going to succeed, well, then in two years' time, when you succeeded, when a regulator comes to your door and says, what have you been doing to color within those lines? If you can answer that with two years of evidence, I think that's probably where you're doing things wrong. So you there's ways to do this compliantly.

There's ways to do this correctly. I think it's not as flashy and it's not as common and it's not as easy to get access to this information without having staffing multiple compliance officers, without staffing multiple lawyers, without having all of this information. So what we're, I guess the ultimate goal here is you if you're going to do something, do it once and do it right. And if you're not going to do that, if you're going to say breaks off, then the understanding is regulations are becoming less nebulous.

And once those become less nebulous and you're outside of the colored areas, then scary things happen. On a x, you guys have recently put out, and we we've been hearing this actually a lot. The

compliance is the moat narrative. Best yield is now gated. Where does that conviction come from? And where and if this if this also, personally, I've been getting to know the Ooma and across team actually in the last couple weeks, met with Hart and Ryan recently just kinda getting to know them and their work and prediction markets and stuff like that. One wanting to know where the conviction around compliance and where this where this specifically becomes defensible. This seems like a really core belief

of the brand at this point. Yeah. I mean but talking about Ooma and across Art and Ryan, great product people and great founders. If you know anything if you know about across around everything around intent based bridging and every the way that Across has built their product, they've really been cognizant of staying in those cutter colored lines. So everything is like they have done everything in their sense to not become a money transfer business.

And that was always the pedigree that we grew up with talking to Hart and Ryan and making sure that you color in the lines and making sure that when you're building things in prediction markets, you you don't get Wells notices. You make sure that everything is permissionless and all the DeFi checks are in place. We took that same mindset and said, great.

Neo Finance is here to say compliance is gonna be a mope because if you do believe that traditional TradFi and and DeFi is gonna smash together, They're they are already regulated. They and they are already gonna build tokenized products. And what do we know? We think that stablecoin rails are a superior product than ACH, SWIFT, and all these other things. So all businesses are going to adopt this, and they're gonna move money at, like, speed.

And and the other thing is businesses that want to let's say you're a business. You have $10,000,000 of deposits. You really cannot tell them that, like, your x fault got drained, we can't do anything about it. Right? You need a counterparty that dealt with compliance and has it has permission and white listing and making sure that all of that stuff that if you are building, let's say, a or a product like deal or something that you're holding customers money, You have a counterparty.

You have all the compliance and everything they need that if you need to make them whole, you can get insurance policies on this. And this is where the regulation and compliance mode just gets thicker and thicker and deeper into into the weeds.

What do so, you know, we we've seen neobanks go deposit into an Aave pool or go deposit into a more of a Morpho vault. This feels like a very different model that you talked about with accounts versus actually pooling those funds together. So, like, kind of the age old question right now is, where does the yield come from in this model? For sure. I the yield comes in part, and then this is the best part. It's the Neo finances directive.

So Blend is credibly neutral. We do not go and we do not aggregate yield, and we do not determine where funds go. The Neo finance app can choose the permission or the permissionless model. They can direct these accounts to go into Morpho or Euler or Aave. That's their directive. And Glenn's focus and our job is to be the rails, the credibly neutral rails.

So if that Neo Finance, their risk officer has determined that permissionless finance is the correct way for that business, then that is their that is their directive and their mandate, and Blend is contractually as the rails, we will facilitate that. There's also the permissioned approach. So the yield being held as a measure of backing of regulated products and where those exist in in, like, the on chain context.

So those two, they're not necessarily mutually exclusive, and Neo finance apps tend to use multiple sources. But the real consideration here why you would use Slend is so that the information and the the account level information that is going into these positions is tracked, audited, logged at every step. So if a regulator has any questions, you can pull the whole log down. You can enrich the user's lives with reporting and all of the connectors, the conveniences of Web two.

Blend is not, when it comes to this yield model that we've built, it's not just an aggregator. We're doing exactly what the neobank wants and the neobank could want permissionless. The neobank could want permissioned. We don't, we don't choose. We're not a we're not in the business of choosing where folks put their money. We're just in the business of making sure that they can make it however they need in the safest way possible. Which Jamie, I don't know if this is helpful. I'm just popping this up.

Does this look like a little bit of maybe walk through this a little bit. I think it was sort of what you were describing before. Of course. Yeah. So when a neobank or a neofinance app decides they want to update the positions and allocations of a particular user or user set, that information is logged off chain. That information is stored in, in like a readily available audit section of the portal, of the Blend portal.

And then when every user begins to initiate the transactions that needs to happen to get into this new intent, That information is we have the before picture, we have a picture and we have the after picture. We're also doing things like OFAC screening and open sanction screening, and we're doing this in our API. And so if something does go wrong, we can immediately notify the the Neo Finance app. So when it comes to due diligence, really what's going on is we are making sure wallets are screened.

We're making sure they're screened at a regular cadence. We are able to prove that that audit log exists with the on chain evidence and the off chain so that the user and the Neo Finance app can really see the holistic picture of where funds are moving, why funds are moving, and how they move.

What are you seeing, Neo banks? Like, what do they choose? What's what's the majority? Is it swaying one way or another versus, you know, permission, not permission right now?

Has that I think

Is it has it been one side and the the tides are shifting?

I think the way you can kinda think about this is that there isn't a one, like, form factor that fits all in your finance apps. Right? So let's say I think, like, everyone is enjoying, like, Eric from Flex's content. Right? So that's like a product right there. Right? Shout out to Eric. And and then you do have the traditional neobanks out there, like, you know, the CAS, the VICI's, the, you know, Koshmonies. Right? And so each one of them have each different needs for their customer type.

If you are, like, a product that's dealing with b two b businesses, you're more likely to pick pick up permission product because you have remember, like, you're also like, the whole point of a neofinence is you're the the thing that you're trying to crack is distribution. So, like, having a Frankl Templeton or Agora or a VanEck in your app allows to build confidence, and and it allows you to break safety because you are these are not people parking on, like, in 50 k and say, I'm yield farming for 17%.

They're parking a millions of dollars that want three to 4% of safe treasury products, and they wanna move it as lightning speed using stablecoin rails. And then they use Blend underneath because it what Blend does is we're interoperability layer. We built we help build across. So we know when to use CCTP, CCIP, layer zero. We know how to make it gasless. We know how to make sure that money gets safely to the end in a compliant way. And then so that also works for the other side where you're, hey.

You have you're a neobank that's on the edge, and your users love that 16%. And then you wanna use Blend and saying, hey, Blend. This is a full enterprise back end, so I wanna rebalance my basket when I want to. So today, you could use you know, Obvi's giving great incentive 7%. And then tomorrow, those Merkel rewards dry up. The neobank can literally go into Blend, switch change their basket to Morpho. Steakhouse is giving 12% Merkle rewards. I wanna do that.

And they wanna farm for their users, then they can do that. So, okay, it's not a one click thing. Our goal is to stay incredibly neutral. We also use Filador for ratings on the DeFi side so that you can have make the whole point is information load. What I keep telling everybody, and shout out to Keoni for writing this from Monet, is, like, DeFi, like, smart contracts are really not, like, the crux of the problem of being dangerous. It's op sec.

And do you have enough information so your compliance officers can make these? And that's where a Filador and all these neutral, like, and all these ratings come in. So when you do wanna pick, like, a steakhouse vault, you can see, oh, it's rated 8.9. You can see how long it's been done. You can see what kind of, like, chain link providers are they using. Have they have any past history? And then you can make a you can make an executive decision. And and like I said, on the other side, when you feel that, nah.

I'm still not ready for DeFi, there's permissioned products that do whitelisting to all of the the things that you need from a from a safety point of view. How do you see the landscape changing right now? You see more folk coming out with their BinNet protocol for fixed rate lending. Do you think that's gonna change the approach that neobanks have to products like Blend and where they choose to allocate their funds? Yeah. So the really interesting thing is Blend is able to map to those permissionless markets.

I think a really interesting level set when we think about this is Blend is outside of the band of Morpho. We love Morpho. I hope Morpho kills it. They're doing great. And we're never going to stand in the way of that. And our goal is to allow these Neo finance apps through a single integration to get their user funds safely into Morpho if that was their mandate and to come out. So yes, I think Morpho Midnight was an incredible advance in Morpho's V2 stack.

Their V2 markets is super interesting and we're very much in the weeds there. And I'd be really curious to see how the other primitives start to catch up. Yeah. What

other players are kind of in that in that layer around them on the curation side or on the, like, other attempts are you guys seeing around Morpho Midnight? What other curators or systems are flavored similarly to this? Seems like kind of an emerging

an emerging space right now. Yeah. I I would really personally, I I think they've led the charge and their first mover here, like, in a big way on top of their largest their large raise announcement. I'd love to see the other primitives as they as they follow suit. I'd love to see Beta's approach, Euler, Aave's approach. It's really an interesting thing. I think when we talk in terms of fixed fixed credit, you look at right now, you might look at something like Pendle.

Pendle is offering a cohesive yield in, like, in a pretty consistent stepwise way.

And I think Morpho is the first one to contend from that from a more, like, primitive lending market perspective. What we haven't spent much time exploring Pendle. It looks like y'all have a relationship with them. What what does that look like? Just to double click on this a little bit. Pendle is a really interesting asset class of of

of assets that can earn funds on existing. It's not something that we necessarily route to anymore. This was more Blend v one was something we really worked well with them. Pendle is you find Pendle tokens to be common in looping when you talk about DeFi. Blend made a conscious decision a few months back to deprecate looping because it's something that's really interesting, but it creates a mesh of synthetic leverage that could become unstable. Looping in my my my, you know, I immediately get like, god. Exactly.

It's gonna seem like it's a different market. We originally supported it if the neobank wanted it, but we've we've moved away from that pretty aggressively because it creates unstable, like, positions. And if your position is something that is liquidatable, you're in a situation where you're very much, like, you're very much at risk of a liquidity crunch. And to us, that was the thing that most compliance officers would rightfully avoid. And so we've deprecated that access. But Pendle is a really cool platform.

I think Morpho Midnight is doing great work to normalize what they're doing in in a more robust way. And so I'd love to see how Kendall v three looks after midnight. I'd love to see all the other primitives catch up to this idea of fixed rate credit markets. I think just to add to that, we if there's one word that can sum up blend, boring. Our goal is to be boring. Okay? Like, I we I that's one simple where we our goal is to be boring, and crypto has enough excitement that we don't wanna add.

We don't we're not planning to add to it. We wanna talk to your compliance officers. We wanna talk to your legal officers. We want to move we know that, yeah, Gwenda's boring. The whole point is, like, we know stablecoin rails work great and safely across, and all the bridges have proved all this.

Now how do we make it so it connects to traditional if you need that and make sure that, like, you, as a neofans product, can get the best of, like, the stablecoin world in a way that you don't end up in any like, in a box in in Rikers Island or somewhere scary. That's our goal here. Boring.

That's awesome. Zach, do wanna wrap the fire, or do you wanna you wanna wrap? Where do you wanna go? No. I think we'll wrap here because they're they're they're set down than we normally are in in Yeah. Banks. So

I think you covered everything that that we want. So I have maybe I have maybe one more question. We we we typically, like, do a rapid fire, but we're typically meeting with the, neobank application layer themselves. But maybe just one more we sort of were doing this before, but just any other decisive or thoughtful changes in in the recent past? You we've mentioned the idea of looping and moving away from certain things in that.

Any other recent convictions or recent decisions you both have made around how you are building Blend and putting together this neobank stack? Any either things that you have recently added or taken away based on recent

movements in the market? Yeah. The the biggest takeaway is that, you know, these products in the web to exist, the plaids, the you know, there's all these products that kinda connect you into these traditional rails. The pain points are around KYC and KYB. So the thing that we're building at Blend is this neobank kit with Monad and all of their parties. So if you if you are a provider that has compliance in KYC and KYB needs, you can plug into Blend, and we can be a distribution partner to you.

So you can your token sharing can flow through Blend, and that allows that user if they came in through Blend to get yield, and now they can plug into a Wirex product. They can plug into a Reign product. They can plug into Dakota. They can plug into wherever they need. So that's their decision is to meet that pain. Same thing what they do. Like I said, Vlad, we have the columns of the world, and we're building that same thing in in the web three is our goal.

And yield was the easiest way to prove out that compliance matters because it's always scary. But compliance matters for on ramps. Compliance matters for cards. It's gonna keep going on, and we wanna be this one stop shop that plugs in just like the plaids and the and the columns of web two.

Yeah. It's amazing. We there there seems to be a an a beautiful little friend group going on here. We got Monads. We've we have Agora portal. It's like this interesting I think y'all have done a great job of of finding I'm hitting you with an AUST cannon before we leave. I just I feel like what maybe maybe last question. I know I keep doing this. What speak a little bit about the we we and we've seen these sort of worlds exist or ecosystems exist in Monad and and Agora and and some of the stuff.

Why does that make sense to maybe initially as you build the business, really anchor yourselves to an ecosystem like Monad and maybe the surrounding friendlies around there? Is that kind of how you think about it, or am I maybe observing this incorrectly? It seems like there's sort of the Monad usual suspects floating around here, which isn't a bad thing, but just like, what's the benefit to doing it that way for Blend? I think we why we chose to work closer with, like, Dick from Angora, Monad,

and other players is that it's credibility in this space and being good actors for a long time is a key thing. Like, I think we've all been kinda pseudo hurt by these pseudo anonymous sounders that don't wanna they wanna put, like, an NFT picture up and you don't know who they are. These people are willing to put their face out and stick a stake in the ground and say who we are. And building a business around with credible people, that's what businesses are. It's technology isn't really a mode anymore.

It's the people and the partnerships that you work with. And if you have great products like Agora and Monad that can help you get the core mission through, I think we're all in the same core mission, making crypto and stablecoins work. So that's why we stuck with these partners. Yep. They're incredibly neutral, and they're, like, high caliber people to work with. Well said.

Drew, you're muted. Yeah. Okay. I already said well sized. I'll take that, Osa. Well said. Well said. Sorry. Sorry. Yeah. Well, thank you both for coming on. Excited to follow along on the journey with Blend, and, yeah, love to have you back on. And and let us know, anybody that's going live with Blend, how they're using it, if you have anybody that that sticks out that says, hey. This is a good use case. Hey. Thank you. Come

to mind. Yeah. I think the next person you should interview, shout out to Ravi from Brookwell. They have FDIC insured accounts. I think they're using Airborne as a shadow bank. One of the coolest founders. Nice. If you ever go to New York, play some ping pong with him because he will he'll sort of go your ego. At the table. Yeah.

So go talk to Brookwell. Can you say his name one more time? I'm gonna bring up this LinkedIn. So

Robbie from Brookwell. Looks like this is this is the one. Right? There you go. Yeah. That's the one. They're Alright. Opening my Brookwell.

Open.

Thank you, Zach. So far. Zach, he was in the in in our in our green room. He dropped it in our Slack channel. He was on it. Yeah. Alright. Great product. Up up next. Yeah. A great product. They've really been compliance focused. We we love what they do, and I can see this being one of the top neobanks in the next three months. What do they do so well? Quick shout out while we're while we're giving them flowers. What what's so great about them? Yeah. Go ahead, Jamie. They have a sponsor bank as Eribor.

So they're they're as close to a banking provider as you can get. So they they've really decided to take the cash account to the next level for US customers. And from a user experience point of view, it's it's not easy to get a

I mean, I I I Airborne doesn't work with everyone, so I feel like it's a pretty right. It's a nice rite of passage at least at this point to be able to say that. Yeah. And they also seamlessly melded the experience of stablecoin versus fiat. You don't really know where you are in the platform. It all feels like one unified experience, and I think that'll be the industry golden standard in the next three months. And they're powered by Blend, so we're buying. There we go. There we go. Alright. We'll open invite.

We'd love to have them on. Any other neobanks or founders that y'all are working with, we would, yeah, love love to. You can actually go to neo.stable-.com and apply to be on. So thank you both for being on, and it was a pleasure getting to know Blend today. Perfect. Thank you so much. Appreciate you guys. Thank you. Take care.