Neobanks like Chime, which lack physical branches, have found a niche offering services like direct deposit, checking accounts, and paycheck advance all within an app. Now, a neobank called Cogni is including a distinctly Web3 feature in its app: a noncustodial crypto wallet.
While many financial firms let customers buy and sell crypto, they typically do so through so-called hosted wallets, which are ultimately controlled by the firm. Noncustodial wallets, by contrast, give the wallet holder the ultimate control over their crypto by means of a series of code words known as a seed phrase.
In the case of Cogni, customers set up the wallet where they can send and receive Bitcoin, Ethereum, and a handful of other cryptocurrencies as well as NFTs. They control the wallet via the seed phrase they receive, but can also use facial ID.
While the wallet is located within the Cogni app next to other services, it's not connected to the customer's bank account and the app does not—for now—offer access to an exchange to buy crypto. In an interview, Cogni CEO Archie Ravishankar told Fortune that the company plans to tie the wallet to bank accounts in the future and to let customers buy and sell crypto.
Cogni launched in 2018 as a lifestyle brand that offered users discounted gift cards for companies like Adidas and Southwest Airlines. The company began leaning into crypto and Web3 earlier this year.
Cogni would not publicly disclose how many customers it has, and it is not a familiar name even among neobanks. But its announcement is significant in that it appears to be first FDIC-insured bank to offer a noncustodial wallet, which could lead others to follow suit. (Fintech giants Robinhood and PayPal both offer noncustodial wallets but aren't technically banks).
Like other neobanks, Cogni relies on a "rent-a-charter" arrangement with an established bank, paying the bank to come under its regulatory umbrella, in this case Community Federal Savings Bank in Queens, New York.
