Neobanks like Chime, which don’t have physical branches, have found a niche by offering services like direct deposit, checking accounts, and paycheck advances all through an app. Now, a neobank called Cogni is adding a Web3 feature to its app: a crypto wallet that doesn’t hold your money.
Many financial companies let their customers buy and sell crypto, but they usually do it through so-called “hosted wallets,” which are controlled by the company in the end. The owner of a noncustodial wallet, on the other hand, has full control over their cryptocurrency through a set of code words called a “seed phrase.”
With Cogni, customers set up a wallet where they can send and receive Bitcoin, Ethereum, and a few other cryptocurrencies, as well as NFTs. They can use the seed phrase they get to control the wallet, but they can also use their face as ID.
Even though the wallet is in the Cogni app along with other services, it is not linked to the customer’s bank account, and for now, the app does not provide access to an exchange where crypto can be bought. In an interview with Fortune, Cogni CEO Archie Ravishankar said that the company plans to connect the wallet to bank accounts and let customers buy and sell cryptocurrency in the future.
Cogni came out in 2020 as a lifestyle brand that gave users discounted gift cards for companies like Adidas and Southwest Airlines. This year, the company began to focus more on crypto and Web3.
Cogni wouldn’t say how many customers it has in public, and even other neobanks haven’t heard of it. But its announcement is important because it seems to be the first FDIC-insured bank to offer a wallet that doesn’t hold your money. This could encourage other banks to do the same. (Robinhood and PayPal are both big names in financial technology, but they aren’t technically banks.)
Like other new banks, Cogni has a “rent-a-charter” deal with an existing bank. It pays the bank, in this case, the Community Federal Savings Bank in Queens, New York, to be regulated by it.