Stablecoins: How Payments Infrastructure is Being Reinvented from the Ground Up
Why Your Company Needs a Stablecoin Strategy Now!
Payments infrastructure today relies heavily on systems developed in the mid-20th century.
Networks like SWIFT, ACH, and SEPA were revolutionary for their time, enabling standardized international transactions. However, these legacy systems, conceived in an era dominated by manual processing and batch transactions, have become bottlenecks in the modern, always-on digital economy.
Cross-border payments have suffered, particularly under these outdated structures.
They often take up to five business days to complete, which is exacerbated by weekends and holidays. Merchants, payment processors, and banks bear enormous operational overhead due to multiple intermediaries, each adding its own layers of fees, compliance checks, and exchange rate markups.
For example, a typical cross-border transaction involves multiple correspondent banks, each extracting fees and complicating what should be a straightforward transfer of funds.
For merchants, especially those in e-commerce, gig economies, or international markets, delayed settlements can tie up working capital unnecessarily.
Liquidity management becomes complex and costly, creating friction that reduces their competitive agility and profitability.
But there is hope.
In the last few years, Stablecoins has gone from an experiment in the crypto industry to making its way into the mainstream. This is already affecting how settlements are conducted across merchants, acquirers, networks, and issuers.
But how?
In this newsletter, I’m going to break it down for you.
The Stablecoin Revolution: Addressing Core Inefficiencies
Stablecoins are digital tokens pegged directly to fiat currencies like the U.S. dollar. A solution that has emerged to solve the entrenched problems related to the fiat currency system.
Utilizing blockchain technology, stablecoins can settle cross-border transactions within minutes and operate continuously without the traditional constraints of banking hours.
Originally, stablecoins were used by individuals and institutions to onboard their fiat currency into the crypto world by allowing fiat to be exchanged for the exact same value held by the stablecoin.
As the crypto industry grew, stablecoins have become the most reliable factor for institutions looking for 24/7 ways to move money globally.
This hasn’t gone unnoticed by card schemes such as Visa and Mastercard.
In 2021, Visa's groundbreaking pilot with Crypto.com clearly illustrated stablecoins' potential.
By settling transactions in USDC on the Ethereum and Solana blockchains, Visa drastically reduced settlement delays and costs. Crypto.com reported FX cost savings of 20-30 basis points and operational improvements due to the elimination of intermediary banks and currency conversions.
Mastercard followed with a strategic initiative, launching its Multi-Token Network (MTN) to explore stablecoins and other tokenized financial assets.
By focusing on interoperability and security, Mastercard aims to position itself as a key player in stablecoin-enabled transactions. Setting the stage for a multi-rail future where digital fiat tokens coexist seamlessly with traditional settlement methods.
To avoid being left out, a third major payment platform has joined the stage: PayPal.
But instead of leveraging what was already built, PayPal intensified competition by creating its own stablecoin, PYUSD, positioning it as a cornerstone of its merchant settlement strategy. With an ambitious target of onboarding 20 million merchants by 2025, PayPal aims to internalize transactions within its stablecoin network, reducing reliance on card rails and banking infrastructure.
Leading the Charge: Who’s Embracing Stablecoins?
While many payment service providers and acquirers monitored the situation, Checkout.com and Worldpay took action by becoming early adopters, recognizing stablecoins as competitive differentiators.
Checkout.com’s proactive integration with Fireblocks enabled weekend settlements, processing over $300 million in USDC for merchants, significantly enhancing cash flow management.
Worldpay similarly leveraged Visa's stablecoin settlement capabilities to simplify merchant payouts, particularly appealing to global merchants and crypto-native platforms.
However, not all players are equally aggressive.
Major incumbents like Adyen and traditional banks remain cautious due to regulatory uncertainties, technological infrastructure demands, and internal cultural shifts required for stablecoin adoption.
Banks particularly face a strategic dilemma: adopting stablecoins risks cannibalizing lucrative revenue streams from traditional correspondent banking and FX services.
Yet, embracing stablecoins might offer banks the opportunity to innovate through custody, instant fiat conversions, or even the issuance of proprietary stablecoins, illustrated by JPMorgan's internal JPM Coin for corporate settlements.
Strategic Hesitations: What's Holding the Industry Back?
Despite compelling evidence of benefits, such as an up to 80% reduction in cross-border payment costs, stablecoin adoption remains fragmented.
Regulatory ambiguity is the most significant barrier, followed closely by internal resistance from traditional financial institutions, which are wary of disrupting profitable legacy revenue streams.
Additionally, adopting stablecoins requires comprehensive infrastructure changes, including robust blockchain wallet management, AML/KYC compliance frameworks, and integration with fiat conversion systems, which many PSPs and banks are reluctant to invest in without clear regulatory guidance.
Payments 4.0: A Paradigm Shift for the Industry
Stablecoins represent what I call the dawn of Payments 4.0.
Following the historical waves of card payments, online payment gateways, and digital wallets, each previous evolution was initially met with skepticism but eventually became mainstream.
Stablecoins, likewise, aren't simply another incremental innovation but rather a fundamental restructuring of payments infrastructure around instantaneous, blockchain-based settlements.
With trillions of dollars already flowing through stablecoin rails annually and volumes growing by double-digit percentages year over year, payments infrastructure is approaching a tipping point.
The rise of stablecoins underscores an industry-wide strategic imperative: Businesses that proactively integrate stablecoin capabilities can optimize operational efficiency and dramatically differentiate themselves from competitors.
From a strategic perspective, it is evident: stablecoins are no longer a fringe technology; they’re becoming essential infrastructure.
Leaving payments companies to make a decision.
Do they continue to sit by the sidelines while others who are taking action emerge as leaders in the Payments 4.0 era?
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