Fintechs are coming for stablecoins: let's break it down

You’d be hard pressed to find a financial institution that isn’t talking about stablecoins right now.?

This week Stripe acquired Bridge, placing a $1 billion bet on stablecoins as a new global payment rail (calling them “superconductors” for financial services), just six months after it reintroduced crypto checkout into its product with USDC.?

Stripe is the latest in a flurry of fintechs flocking to stablecoins.

Revolut and Robinhood are rumoured to be eyeing them, Visa says it will issue stablecoins for banks, with BBVA already onboard, PayPal has paid its first invoice to EY in stablecoins, Worldpay plans to be a blockchain validator and even Swift is getting more serious about digital asset transactions.?

The industry heavyweights are making their moves. As more providers enter the market, stablecoin payments volumes continue to grow. $24 trillion stablecoin transactions were settled this year, with payments accounting for more than $5 trillion of those. Stablecoins make up more than half of all blockchain transactions, with 25 million unique active wallets moving stablecoins every month — a 15x growth since 2020.?

As the biggest stablecoin payments infrastructure provider, by quite some margin, in terms of both revenue and payments volume (we process $8bn in annualized payments volume for global enterprises like Deel), BVNK has a unique view at the centre.

So why are fintechs coming for stablecoins, and why now??

At their core, stablecoins provide a more efficient way to move money around the world. They act as a new global base layer for payments, enabling money to move securely, 24/7/365, and settle in an instant.

Let’s break it down further.

Demand for digital dollars

Stablecoins began as a way to bring stability to crypto, and crypto traders were the early adopters.

Today, they're increasingly used by consumers and businesses in emerging markets as a way to store value. Stablecoin adoption is high among those who have had first-hand experience of devaluing local currencies, and the resulting loss of purchasing power.?

A 2024 study from BVNK and Cebr found a stablecoin pricing premium in 17 emerging markets, where users paid around above face-value for stablecoins, as a way to hedge against devaluation (they paid 5% more on average to access stablecoins, up to 30% more in Argentina).

A recent survey from Castle Island Ventures, YouGov and Visa found almost 1 in 2 people in emerging markets used stablecoins as a way to access strong currencies like dollars, in digital form.?

And people aren’t just holding on to stablecoins, they’re using them. As more consumers own stablecoins, more businesses are accepting them at checkout. In Latin America, there’s a 1 in 3 chance that a consumer will have already used stablecoins to pay for something, according to a Mastercard study.

Regulatory tailwinds

New regulations in Europe are helping to bring industry-wide trust to stablecoins in 2024, making them safer for consumers, and more attractive for businesses.?

The Markets in Crypto Asset (MiCA) framework goes live in less than 75 days, bringing assurances that stablecoin funds are safeguarded and that regulated crypto service providers are held to similar standards as Europe’s Electronic Money Institutions.

It’s likely we’ll see a broader selection of secure and compliant stablecoin options in the market by year's end.

Deep dive into stablecoin use cases??

BVNK is on a mission to accelerate the global movement of money, building critical infrastructure for businesses to seamlessly transact in both fiat and digital currencies. Our platform supports sending, receiving, exchanging, and storing stablecoins and fiat across domestic and international rails.?

We’ve grown our volumes over 100% year on year, and currently process $8bn a year. Unlike others, we’ve focused on building technical infrastructure from the ground up, to provide ultimate scalability and flexibility for our customers.

We also saw early on that the ability to move seamlessly between stablecoins and major fiat currencies was critical, so we’ve invested heavily in fiat and crypto-asset licensing globally, as well as top tier banking partnerships.

So, let’s get specific about how our customers are using stablecoins. At BVNK, serve three major use cases:

1. Stablecoin pay-ins?
2. Stablecoin payouts?
3. B2B stablecoin settlements?

Let's dig a bit deeper.

1. Stablecoin pay-ins?

Here, businesses enable customers to pay in stablecoins. It’s often driven by a need to reach new markets, where a business doesn't have access to local banking or where local banking infrastructure is problematic.

Or, it’s driven by local payment preferences. Most businesses we work with choose not to hold the stablecoins themselves: instead BVNK auto-settles them in their preferred fiat currency. Early adopter industries here include luxury goods (eg Ferrari, Farfetch) Forex/CFD (eg IC), Gaming (eg Stake). C2B customer pay-ins represent around 15% of our stablecoin volumes at BVNK.

2. Stablecoin payouts

Here, businesses need to pay out to customers, contractors or suppliers globally. They face problems with disjointed, slow and expensive cross-border or local payments infrastructure.

For those receiving funds, stablecoins act as ‘digital dollars’, mitigating exchange rate risks and preventing delays associated with traditional cross-border payment rails. This has implications for easier budgeting and financial planning, stabilising paycheck values and providing more certainty for employers and employees.?

Again the businesses we work with don’t need to hold stablecoins funds – they often keep funds in fiat in BVNK safeguarded virtual accounts, and BVNK converts on their behalf on payout. Early adopter industries include Employer of Record industries (eg Deel).

Stablecoin payouts is a newer but fast-growing use case. It represents around 15% of our stablecoin volumes, but we’re seeing significant growth, with volumes more than doubling since January.

3. Stablecoin settlements

B2B settlements make up the majority (c.70%) of our stablecoin payment volumes.

Businesses are growing customers and supply chains globally but are often let down by traditional payment systems – with lengthy settlement delays, unpredictable charges and lack of visibility into the payment status.?

Fintechs are held back by the same issues. Consider a remittance provider that has to perfectly predict demand and balance liquidity between bank accounts around the world, prefunding local payout partners and keeping costly overdrafts, while dealing with depreciating local currencies in some markets.

Or a merchant acquirer who needs to settle its merchants reliably and ever faster to stay competitive, but traditional cross-border settlement times can still take up to a week. With stablecoins settling quickly across the globe, businesses can better manage their treasuries, improve cash flow and reduce the cost of borrowing, while fintechs can move client funds faster and avoid costly prefunding.

A multi-stablecoin, multi-rail future?

In the last 50 years, there have been huge advances to the frontend of payments, while the underlying rails have remained relatively untouched. Now, the backend is getting a needed upgrade. Stablecoins are becoming a core payment rail, on par with traditional methods like Swift, SEPA and ACH.?

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. It’s not difficult to imagine a world in five years' time where real-time local payment rails integrate seamlessly with blockchains.?

When we get there, it will be one of the most incredible value unlocks for the payments ecosystem. BVNK aims to be at the centre of that shift, connecting banks and blockchains to create a global payment network that accelerates the movement of money across borders.