Slowly, slowly: then all at once – Hemingway’s ‘law of motion’ explains how big changes often unfold.
It’s a familiar story in fintech. Consider digital wallets or contactless payments: what began as cautious, incremental adoption eventually reached a tipping point, changing the way many of us pay. In 2024, stablecoins have reached this inflection point.
Why?
They’ve found their killer use case in payments, away from the casino culture of crypto. What started as a tool for trading, is now a mainstream payment rail, bringing speed, transparency, and accessibility that traditional systems can’t match. There were $5 trillion stablecoin transactions in the past year – discounting usage for trading. To put that number into perspective, it’s over a third of the volume processed by Visa, a global payments network that’s been around for 60 years.
They’ve found product-market fit beyond crypto-native businesses, and they’re being adopted by some of the world’s largest financial institutions. PayPal launched their own. Stripe bought a stablecoin company. Visa is helping banks to launch stablecoins.
New regulation is legitimizing their place in global financial services. Regulators in Europe, the Middle East and Asia are bringing stronger safeguards to protect the businesses and consumers that use stablecoins; while the leading tokens continue to prove their resilience.
As if all at once, stablecoins have emerged as a new core payment rail for fintechs.
The reality is though that most big payments providers have been on a multi-year stablecoin journey. They’ve dipped their toes in, at times pulled back. The big announcements of 2024 come after several years of experimentation, and rising customer demand for stablecoins.
BVNK is one example: the company provides stablecoin payment infrastructure for global customers like Deel and Trust Payments helping them accelerate global money movement. (They now process $8bn in annualized payments volumes.)
It’s still early days for stablecoin adoption in payments, and use cases are evolving quickly. In this article, we’ll break down a typical journey for stablecoin adoption that we see among payments companies.
But before we get to the how, here’s a primer on why.
Why are fintechs adopting stablecoins?
Fintechs are adopting stablecoins because they’ve realized that the rails they operate on are inefficient.
Or as Nic Carter, general partner at VC firm Castle Island, puts it:
Fintechs have spent the last few decades reinventing financial experiences to solve customer problems. They’ve built incredible value-added services on top of traditional banking rails.
You could argue it’s the reason that fintech exists in the first place.
Cross-border payments are a clear example:
Only a quarter of the banks in the world are interconnected via Swift and other payment networks.
The remaining rely on the correspondent banking system to settle funds – a clunky system of intermediaries, which adds cost and means that, for emerging market routes especially, final settlement of funds can take up to a week.
So, fintechs created their own global networks to move money between accounts, perfectly predict demand and manage their own treasury. Thanks to the likes of Wise and WorldRemit, consumers can transfer money across the world instantly and cheaply.
But underneath, fintechs are stuck with the same old correspondent banking rails. Money takes days to clear, so they need to prefund their bank accounts globally, which has significant impacts on working capital.
They also lack transparency, especially when there are problems with a cross-border transaction. To share an example close to home: one of our US investors sent a bank payment to our business account in the UK, but it got lost in the Swift system for more than a month. (For a detailed read on how international payments currently work via Swift, take a look at article from Andreessen Horrowitz)
When your business is moving money, these problems are more than inconveniences, they hold back growth and innovation.
Stablecoins solve these problems of speed and transparency for fintechs – and for their customers.
Stablecoins are an infrastructure upgrade for payments. Or as Stripe’s Patrick Collison put it, “superconductors for financial services”. They make it really easy to transfer money globally, in an instant, at a fraction of the cost. They operate across blockchains accessible 24/7/365.
When your business is moving money, this kind of efficiency creates real competitive advantage.
How are fintechs integrating stablecoins?
And as legal frameworks solidify around the world, stablecoins are becoming more attractive as a path to product innovation for regulated payment companies.
BVNK gives businesses the tools to send, receive, exchange, and store stablecoins and fiat currencies across global rails, with $8bn in annualized volumes. We believe that fintechs will continue to adopt stablecoins to accelerate global money movement.
And we see a clear pattern emerging for how fintechs integrate stablecoins, typically beginning with B2B settlements and evolving into consumer applications.
Common pathways for stablecoin integration among traditional fintechs:
Traditional payments for crypto firms. PSPs support crypto firms with global expansion, doing their card processing. When Coinbase first launched debit cards in Europe in 2019, Worldpay supported them.
The stablecoin sandwich. Stablecoins become the middle layer of global transactions. For instance, PSPs work with local payment partners to collect fiat currencies in emerging markets. Those local partners send those funds to PSPs in stablecoins: but PSPs pay their customers in fiat. Or as Simon Taylor puts it:“PSPs and payment companies will use Stablecoins to settle with each other directly instead of waiting for the banks and Swift. Instead of the old cross-border rails, the Stablecoin sits between the PSPs. The advantage is that the sender and receiver never have to think about or worry about Stablecoins or Crypto or wallets.”
B2B stablecoin settlements. PSPs settle their crypto-native merchants in stablecoins: those customers are comfortable to receive them, and it means they get their funds faster, with lower fees. Visa became one of the first major payment networks to launch a pilot programme enabling clients to settle cross-border transactions in USD Coin (USDC). The initial pilot in 2020 enabled Crypto.com, one of the world’s largest crypto platforms, to send USDC to Visa, to settle a portion of its global settlement obligations for its Visa card programmes. They’ve since expanded their pilot to merchant acquirers WorldPay and Nuvei. As other businesses outside of crypto become comfortable with stablecoins, PSPs expand their settlement programmes to other industries.
Consumer pay-ins and payouts. PSPs integrate stablecoins into checkout, so their merchants can accept stablecoins but receive fiat (as BVNK does for merchants, and as Stripe also announced this year). Or they enable consumer payouts in stablecoins. Worldpay for example is developing a payouts product which can support platforms like Etsy and Airbnb in paying sellers and hosts globally, in places where there is currency volatility or where they just can’t get access to banking. Merchants won’t need to hold stablecoins: they pay their PSP in fiat, the PSP converts and pays out on their behalf.
Stablecoin wallets for businesses. Fintechs offer their business or individual customers stablecoin wallets, so those customers can send, receive, hold and convert stablecoins. BVNK is pioneering embedded stablecoins payments for fintechs like Freemarket, who launched stablecoins wallets for its customers in 2024.
While B2B settlement is the primary use case, at BVNK we’re seeing consumer payments – specifically payouts – growing rapidly, with volumes doubling since January.
What are the challenges for fintechs?
Today, integrating stablecoins into your product isn’t as simple as we might like. A combination of regulatory compliance and banking partner challenges can stifle projects before they get going. To build with stablecoins, PSPs have to grapple with:
Technical infrastructure: Interacting with blockchains is very different to working with fiat systems. It’s technically challenging for someone who has honed their skills in the world of traditional finance – involving numerous different networks and tokens that are constantly evolving.
Crypto regulations: fintechs are no strangers to globally-fragmented regulatory regimes. Getting the right crypto licenses can take years. And not every business has the appetite to manage ongoing compliance for stablecoins globally. The consequence of failure is significant, since fintechs depend on their regulatory approvals to operate.
Financial crime models: preventing financial crime on blockchains requires a new way of thinking, leveraging blockchain analytics to build a picture of ‘risk exposure’ through time. As a fintech building with stablecoins, you need a strong compliance and financial crime team – and you need to educate your customers so they can manage risks on their side too.
Banking partnerships: bringing your banking partners with you on your stablecoin journey is critical. It requires transparency, education and demonstrating the robustness of your compliance controls.
PSPs face a choice: build from the ground up, acquire like Stripe has done, or partner with an infrastructure provider. BVNK has spent the past four years building stablecoin payments infrastructure so their customers don’t need to start from scratch.
Fiat money isn’t going anywhere (yet)
I’m hugely excited to see payments are getting their infrastructure upgrade.
In 2024, we’re just scratching the surface of what fintechs will achieve with stablecoins. In the next decade, as G20 currencies move onto blockchains, businesses will increasingly need to transact in stablecoins. But fiat will remain a key part of the puzzle.
Imagine a world in five years' time where local payment rails integrate seamlessly with blockchains. And stablecoins and all leading fiat currencies are seamlessly interchangeable in real-time.
BVNK is focused on building the backbone for stablecoin and fiat transactions globally, empowering fintechs on their stablecoin payments journey.
