Banking without Banks? $30B onchain platform goes after consumers and SMEs

Contrary to popular narrative, stablecoins are not a threat to banks’ large corporate transaction-banking businesses. Tokenized bank deposits from JPMorgan, Citi, HSBC and DBS already offer 24/7 programmable and multi-FX money movement to the largest corporates in the world. And more products with better connectivities are in the works from banks.

But disruption to banking due to stablecoins and onchain finance is happening. And it is happening already in consumer banking, SME banking, and wealth management, where solutions immediacy matter and switching costs are low.

This week, Aave, the $30B AUM onchain money market platform built entirely on blockchain and smart contract, delivered what might be the most important consumers and SME savings product from the onchain world yet. It released the Aave App, a product that strikes at the core of the 3.6 trillion dollar global retail banking and wealth management industry.

The new Aave App is a neobank style savings interface built entirely onchain. It packages Aave’s onchain lending yield infrastructure into a mobile-first fintech experience that everyday non-crypto users are familiar with.

In this Weekly Research note, we explore how onchain financial apps like Aave are beginning to disrupt retail and SME banking, how Aave generates yield, and why the Aave App marks a turning point.

What Aave Does

Aave is a lending marketplace built on blockchain that lets users deposit assets such as USDC, USDT, USDS into “liquidity pools”. These pools supply liquidity to borrowers who take out loans against collateral.

Aave functions like an automated money market:

• depositors supply capital

• borrowers post collateral

• interest rates adjust algorithmically

• the protocol enforces overcollateralization and liquidations

  
  

There is no intermediary managing a balance sheet. Instead, the protocol matches suppliers and borrowers programmatically by using smart contracts where rules governing lending rates and a pool’s utilization is linked.

Aave aims for a net interest margin around 1%. It can operate at such thin spreads because its operating costs are near zero. It is software running on the internet, enforcing rules autonomously, and maintaining full transparency. This allows depositors to earn the yield that borrowers pay for liquidity.

Historically, UX friction made Aave difficult for normal users: wallet creation, seed phrases, confusing DeFi interfaces, and unfamiliar risk models. This kept the user base heavily skewed toward crypto natives.

Here is an interesting question: what happens when those frictions disappear? What happens when an average consumer or SME sees a familiar fintech savings app offering a 6.5% yield?

Aave App is attempting to answer that question. Below are the three features that make this launch a watershed moment.

1. Up to 1 million dollars in insurance coverage

One of the biggest risks in DeFi is the possibility of losing funds due to hacks or smart contract failures. Until now, users had no meaningful safety net.

Aave is tackling that directly by offering up to $1 million dollars of insurance coverage per eligible user. This is even higher than the FDIC insurance coverage of $250k. No major DeFi protocol has offered protection at this scale. It is one of the most important consumer protections ever introduced in onchain finance and will meaningfully expand the market.

2. A fintech grade customer experience

Most onchain platforms struggle with two things:

1. They do not own the direct user relationship.

2. They lack mobile first consumer products.

Distribution historically flowed through wallets, aggregators, and interfaces that protocols do not control.

The Aave App changes this dynamic. It is a direct to consumer mobile app that looks and feels like a neobank, at least according to the early release promo videos and graphics. The interface looks familiar, simple, and consumer friendly. Under the hood, user deposits are routed directly into the Aave protocol. The user gets a full stack onchain financial experience without any intermediaries or cumbersome UX.

3. A headline 6.5 percent savings rate

The app advertises a 6.5% yield - a number that blows SMEs and consumer savings product out of the water. 

While rates on Aave fluctuate with market demand and risk dynamics, the headline number alone will command attention from users frustrated with low bank savings rates. 

Before consumer and SME banking executives dismiss this as an insignificant player from a niche market sector, consider this: will the SMEs sitting on $100k/$500k/$1M bank balances feel similarly dismissive when they calculate how much money they are losing by NOT using a product like the Aave App?

More importantly, Aave’s yield is not coming from proprietary trading or opaque balance sheet leverage. It is the natural result of a lending marketplace where borrowers pay for liquidity and depositors earn the spread.

Bottom Line

The Aave App could represent an important moment for onchain financial products as they begin moving from crypto natives to mainstream users. Regulatory and risk differences remain, but the offering is compelling: insurance coverage, consumer grade UX, and attention grabbing yield.

For banks, this is a preview of a new type of competitor: global, low cost, and able to offer yields that consistently beat savings accounts.

For fintechs, the question is whether users will come to expect embedded DeFi yield in their savings products and whether removing that yield during downturns will remain acceptable.

Aave has shown that onchain savings can look and feel like everyday consumer banking while preserving the core advantages of DeFi. Insurance, intuitive UX, and transparent yield are the combination that can pull onchain finance into the mainstream.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.