How the best fintech wallets provide more transparency and security than banks
Learn how fintech is different from banks, and how fintech wallets differ from traditional finance.
There’s risk in any financial transaction — especially in countries where bank corruption and inflation run rampant. When trying to save money, even during an inflation crisis, it’s important to take a hard look at all your available options.
How does a traditional bank work?
A traditional bank holds deposits of its customers’ money, pools all the money from all its customers, and lends some of it out to other customers (with interest — that’s one big way they make money).
Banks charge many kinds of fees, like deposit fees, withdrawal fees, minimum balance fees, and more, in order to cover the cost of having physical branches and other high operational costs. They also accrue large profits, passing along minimal yield and only offering an average of 0.42% back in APY.
How do fintech wallets work?
Fintech super wallets connect consumers to advanced, encrypted financial technology like blockchain and decentralized finance, with a simple, user-friendly interface. A super wallet like Cenoa, for example, works by letting users create a blockchain-powered account, connecting them to fintech apps that link to their bank and add their funds to their super wallet. The user can then take their funds and convert them into digital dollars, always on par with USD.
On the back end, their funds are added to decentralized Peer-to-Peer lending networks, where they’re lent and borrowed, and can grow — so Cenoa can pass along up to 5% yield.
Unlike traditional banks, fintech wallets are lean operations, and vast majority don’t even have physical offices to pay for — which is part of why they don’t need to charge fees, and how they can pass along excellent yields to each user.
Fintech wallets also don’t actually hold your funds, so they can’t withhold them from you or lose them. For example, Cenoa is a non-custodial blockchain wallet, which means it can never control, move or invest your digital assets. Only you can control, move or invest your digital assets.
Are fintech super wallets safe?
There’s no definitive answer to whether or not all fintech wallets are safe, as new super wallet companies are popping up everywhere, and some will be safer than others. However, there are a few ways you can check if a fintech wallet is safe enough for you to trust it with your money.
1. Find out about the apps and companies that facilitate the super wallet’s operations.
For example, Cenoa lets users hold funds as USDC stablecoins that are always on par with USD, and always available to withdraw – but who facilitates that?
USDC is issued by Circle, a fintech company that’s regulated as a licensed money transmitter under U.S. state law (like PayPal, Stripe, and Apple Pay). Circle’s financial statements are audited annually and subject to review by the SEC, and Circle holds more than $43 billion in reserves and has enabled $9 trillion in transaction volume.
USDC is a fully-reserved stablecoin and you can always redeem it 1:1 for U.S. dollars. And every USDC digital dollar is 100% backed by cash and short-dated U.S. treasuries.
In contrast, traditional banks tend to lack transparency about who runs them, how they manage operations, and who benefits — that’s why the IMF has created a Central Bank Transparency Code for banks to follow.
2. Know that not all crypto or wallets are created equal.
Though stablecoins are a form of cryptocurrency, they don’t experience the more frequent changes in value seen in Bitcoin and other forms of crypto.
Fintech wallets often let users choose whichever cryptocurrency they want to use to hold their funds, which can lead to users making the wrong decision and losing a lot of money. In contrast, holding funds in stablecoins on par with USD is much closer to holding actual USD than it is to holding other forms of crypto.
3. Look for transparency about worst case scenarios.
If your bank goes bankrupt, what would happen to your funds? The founders of the Cenoa Super Wallet want its users to know that their funds are safe, no matter what happens to the company.
“Even in the absolute worst case scenario of Cenoa Super Wallet going bankrupt and our wallet app disappearing — customers can still easily access, manage and withdraw their digital dollars through another wallet.”
How will you save?
Traditional banks are no longer the only option for secure, long-term savings. And newer options, like DeFi wallets, are more transparent and user-friendly, placing the power back in the hands of the user.
Fintech wallets like Cenoa let users add funds, save money free from inflation and depreciation, and watch their digital dollars grow steadily. Borderless superwallets can be an overall more stable option than traditional banks — especially in countries with issues with severe inflation leading to the devaluation of savings accounts.