Multicoin: Why Are We Bullish on Stablecoins Becoming FinTech 4.0?
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Multicoin: Why Are We Bullish on Stablecoins Becoming FinTech 4.0?
Stablecoins are poised to revolutionize the economic models of financial products.
Navigating Web3 tides with focused insightsAuthor: Spencer Applebaum & Eli Qian
Compiled by: TechFlow
Over the past two decades, fintech has transformed how people access financial products, but it hasn't fundamentally changed how money moves.
Innovation has largely focused on cleaner interfaces, smoother user experiences, and more efficient distribution channels, while the core financial infrastructure has remained largely unchanged.
For most of this period, the fintech tech stack was more resold than rebuilt.
Overall, the development of fintech can be divided into four stages:
Fintech 1.0: Digital Distribution (2000-2010)
The earliest wave of fintech made financial services more accessible but not significantly more efficient. Companies like PayPal, E*TRADE, and Mint digitally packaged existing financial products by combining legacy systems (such as ACH, SWIFT, and card networks established decades ago) with internet interfaces.
During this stage, funds settled slowly, compliance processes relied on manual operations, and payment processing was constrained by rigid schedules. Although this period brought financial services online, it did not fundamentally alter how money moved. What changed was merely who could use these financial products, not how they actually functioned.
Fintech 2.0: The Neobank Era (2010-2020)
The next breakthrough came from the proliferation of smartphones and social distribution. Chime offered early wage access for hourly workers; SoFi focused on student loan refinancing for upwardly mobile graduates; Revolut and Nubank served underbanked populations globally through user-friendly interfaces.
Although each company told a more compelling story for a specific audience, they were essentially selling the same product: checking accounts and debit cards running on old payment networks. They still relied on sponsor banks, card networks, and the ACH system, no different from their predecessors.
These companies succeeded not because they built new payment networks, but because they reached customers better. Branding, user onboarding, and customer acquisition became their competitive advantages. In this stage, fintech companies became distribution-savvy enterprises attached to banks.
Fintech 3.0: Embedded Finance (2020-2024)
Around 2020, embedded finance rapidly rose. The proliferation of APIs (Application Programming Interfaces) enabled almost any software company to offer financial products. Marqeta allowed companies to issue cards via APIs; Synapse, Unit, and Treasury Prime offered Banking-as-a-Service (BaaS). Soon, nearly every application could offer payments, cards, or loans.
However, behind these abstraction layers, nothing fundamentally changed. BaaS providers still relied on sponsor banks, compliance frameworks, and payment networks from earlier eras. The abstraction layer shifted from banks to APIs, but economic benefits and control still flowed back to traditional systems.
The Commoditization of Fintech
By the early 2020s, the flaws of this model became apparent. Almost all major neobanks relied on the same small set of sponsor banks and BaaS providers.
Source: Embedded
As companies fiercely competed through performance marketing, customer acquisition costs soared, profit margins were squeezed, fraud and compliance costs surged, and infrastructure became nearly indistinguishable. Competition evolved into a marketing arms race. Many fintech companies tried to differentiate through card colors, sign-up bonuses, and cashback gimmicks.
Meanwhile, control over risk and value concentrated at the bank level. Large institutions like JPMorgan Chase and Bank of America, regulated by the OCC, retained core privileges: accepting deposits, issuing loans, and accessing federal payment networks (like ACH and Fedwire). Fintech companies like Chime, Revolut, and Affirm lacked these privileges and had to rely on licensed banks to provide these services. Banks profited from interest spreads and platform fees; fintech companies relied on interchange fees.
As fintech programs proliferated, regulators subjected their sponsor banks to increasingly stringent scrutiny. Consent orders and heightened supervisory expectations forced banks to invest heavily in compliance, risk management, and oversight of third-party programs. For example, Cross River Bank entered into a consent order with the FDIC; Green Dot Bank faced enforcement action from the Federal Reserve; and the Federal Reserve issued a cease-and-desist order against Evolve Bank.
Banks responded by tightening customer onboarding processes, limiting the number of supported programs, and slowing product iteration. The environment that once supported innovation now required larger scale to justify compliance costs. Fintech industry growth became slower, more expensive, and more inclined towards launching generic products for broad audiences rather than products focused on specific needs.
From our perspective, the main reasons innovation remained at the top of the tech stack for the past 20 years are threefold:
- Money movement infrastructure is monopolized and closed: Visa, Mastercard, and the Federal Reserve's ACH network left little room for competition.
- Startups required substantial capital to launch finance-centric products: Developing a regulated banking application required millions in capital for compliance, fraud prevention, funds management, etc.
- Regulations restricted direct participation: Only licensed institutions could hold funds or move money through core payment networks.
Source: Statista
Given the above constraints, it was wiser to focus on building products rather than directly challenging existing payment networks. The result was that most fintech companies ended up as nicely packaged wrappers around bank APIs. Despite numerous innovations in fintech over the past two decades, the industry saw very few truly new financial primitives. For a long time, there were hardly any viable alternatives.
The crypto industry took the opposite path. Developers first focused on building financial primitives. From Automated Market Makers (AMMs), bonding curves, perpetual contracts, liquidity vaults to on-chain credit, all were developed from the ground up. For the first time in history, financial logic itself became programmable.
Fintech 4.0: Stablecoins and Permissionless Finance
Although the first three fintech eras achieved many innovations, the underlying money movement architecture hardly changed. Whether financial products were delivered through traditional banks, neobanks, or embedded APIs, money still moved on closed, permissioned networks controlled by intermediaries.
Stablecoins change this model. Instead of building software on top of banks, they directly replace the core functions of banks. Developers can interact directly with open, programmable networks. Payments settle on-chain, and custody, lending, and compliance shift from traditional contractual relationships to being handled by software.
Banking-as-a-Service (BaaS) reduced friction but didn't change the economic model. Fintech companies still had to pay compliance fees to sponsor banks, settlement fees to card networks, and access fees to intermediaries. Infrastructure remained expensive and restrictive.
Stablecoins completely eliminate the need to rent access. Instead of calling bank APIs, developers interact directly with open networks. Settlement happens directly on-chain, with fees flowing to protocols rather than intermediaries. We believe this shift dramatically lowers the cost barrier—from millions of dollars to develop via a bank, or hundreds of thousands via BaaS, to just thousands of dollars via permissionless on-chain smart contracts.
This shift is already evident at scale. The market cap of stablecoins grew from near zero to about $300 billion in less than a decade. Even excluding exchange transfers and MEV, the actual economic transaction volume they process has surpassed traditional payment networks like PayPal and Visa. For the first time, a non-bank, non-card payment network can truly operate at a global scale.
Source: Artemis
To understand the practical importance of this shift, we need to first understand how fintech is currently built. A typical fintech company relies on a vast vendor tech stack, including the following layers:
- User Interface/User Experience (UI/UX)
- Banking and Custody Layer: Evolve, Cross River, Synapse, Treasury Prime
- Payment Networks: ACH, Wire, SWIFT, Visa, Mastercard
- Identity & Compliance: Ally, Persona, Sardine
- Fraud Prevention: SentiLink, Socure, Feedzai
- Underwriting/Credit Infrastructure: Plaid, Argyle, Pinwheel
- Risk & Funds Management Infrastructure: Alloy, Unit21
- Capital Markets: Prime Trust, DriveWealth
- Data Aggregation: Plaid, MX
- Compliance/Reporting: FinCEN, OFAC checks
Launching a fintech company on this stack meant managing contracts, audits, incentive structures, and potential failure modes across dozens of partners. Each layer added cost and latency, with many teams spending almost as much time coordinating infrastructure as they did building their product.
A stablecoin-based system dramatically simplifies this complexity. Functions that previously required multiple vendors can now be achieved with a handful of on-chain primitives.
In a world centered on stablecoins and permissionless finance, the following changes are occurring:
- Banking and Custody: Replaced by decentralized solutions like Altitude.
- Payment Networks: Replaced by stablecoins.
- Identity & Compliance: Still needed, but we believe this can be achieved on-chain, maintaining confidentiality and security through technologies like zkMe.
- Underwriting and Credit Infrastructure: Radically overhauled and moved on-chain.
- Capital Markets Firms: Become irrelevant when all assets are tokenized.
- Data Aggregation: Replaced by on-chain data and selective transparency (e.g., via Fully Homomorphic Encryption - FHE).
- Compliance and OFAC Checks: Handled at the wallet level (e.g., if Alice's wallet is on a sanctions list, she cannot interact with the protocol).
The real difference with Fintech 4.0 is that the underlying architecture of finance is finally beginning to change. Instead of developing an application that needs to quietly ask a bank for permission in the background, people are now directly replacing the core functions of banks with stablecoins and open payment networks. Developers are no longer tenants; they become the true "landlords."
Opportunities for Stablecoin-Focused Fintech
The first-order effect of this shift is obvious: the number of fintech companies will increase dramatically. When custody, lending, and fund transfers become almost free and instantaneous, starting a fintech company will become as simple as launching a SaaS product. In a stablecoin-centric world, there's no longer a need for complex integrations with sponsor banks, no card-issuing intermediaries, no multi-day clearing processes, or redundant KYC checks to slow things down.
We believe the fixed cost of creating a finance-centric fintech product will plummet from millions of dollars to thousands. When infrastructure, customer acquisition costs (CAC), and compliance barriers disappear, startups will be able to profitably serve smaller, more specific communities through what we call "stablecoin-focused fintech."
This trend has clear historical precedent. The previous generation of fintech companies initially gained traction by serving specific customer segments: SoFi focused on student loan refinancing, Chime offered early wage access, Greenlight targeted teens with debit cards, and Brex served entrepreneurs who couldn't get traditional business credit. But this focused model didn't become a lasting operational mode. Limited interchange revenue, rising compliance costs, and dependence on sponsor banks forced these companies to expand beyond their original niches. To survive, teams were forced to scale horizontally, adding products users didn't necessarily need, just to make the infrastructure scale viable.
Now, because crypto payment networks and permissionless finance APIs drastically lower startup costs, a new wave of stablecoin neobanks will emerge, each targeting a specific user group, much like the early fintech innovators. With significantly lower operating costs, these neobanks can focus on narrower, more specialized markets and remain focused, such as Sharia-compliant finance, crypto enthusiast lifestyles, or services designed specifically for the unique income and spending patterns of athletes.
More importantly, specialization also significantly optimizes unit economics. Customer acquisition costs (CAC) decrease, cross-selling becomes easier, and customer lifetime value (LTV) increases. Focused fintech companies can precisely target their products and marketing to niche groups that convert efficiently and gain more word-of-mouth by serving specific user communities. These businesses spend less on operations yet can extract more value per customer than the previous generation of fintech companies.
When anyone can launch a fintech company in weeks, the question shifts from "Who can reach the customer?" to "Who truly understands the customer?"
Exploring the Design Space for Focused Fintech
The most attractive opportunities often arise where traditional payment networks fail.
Take adult content creators and performers, for example, who generate billions in annual revenue but are often "deplatformed" by banks and card payment processors due to reputational or chargeback risks. Their income payments can be delayed for days, even held for "compliance review," and they typically pay 10%-20% fees through high-risk payment gateways (like Epoch, CCBill, etc.). We believe stablecoin-based payments can offer instant, irreversible settlement, support programmable compliance, allow performers to self-custody income, automatically allocate income to tax or savings accounts, and receive payments globally without relying on high-risk intermediaries.
Consider professional athletes, especially those in individual sports like golf and tennis, who face unique cash flow and risk dynamics. Their income is concentrated in short careers and often needs to be split among agents, coaches, and team members. They need to pay taxes in multiple states and countries, and injuries can completely interrupt income. A stablecoin-based fintech company could help them tokenize future earnings, pay team salaries using multi-signature wallets, and automatically withhold taxes according to different regional requirements.
Luxury and watch dealers are another market poorly served by traditional financial infrastructure. These businesses frequently move high-value inventory across borders, often completing six-figure transactions via wire transfers or high-risk payment processors while waiting days for settlement. Their working capital is often locked up in inventory in safes or display cases rather than bank accounts, making short-term financing expensive and difficult to obtain. We believe a stablecoin-based fintech company could directly address these issues: offering instant settlement for large transactions, credit lines collateralized by tokenized inventory, and programmable escrow with built-in smart contracts.
When you examine enough of these cases, the same limitations appear repeatedly: traditional banks do not serve users with globalized, irregular, or non-traditional cash flows. But these groups can become profitable markets through stablecoin payment networks. Here are some theoretical examples of focused stablecoin fintech we find attractive:
- Professional Athletes: Income concentrated in short careers; frequent travel and relocation; may need to file taxes in multiple jurisdictions; need to pay coaches, agents, trainers, etc.; may want to hedge injury risk.
- Adult Performers and Creators: Excluded by banks and card payment processors; global audience.
- Unicorn Company Employees: Cash-poor, net worth concentrated in illiquid equity; may face high taxes when exercising options.
- On-Chain Developers: Net worth concentrated in highly volatile tokens; face fiat withdrawal and tax issues.
- Digital Nomads: Passport-free banking, automatic FX conversion; automated tax handling based on location; frequent travel and relocation.
- Prisoners: Difficult and expensive for family/friends to deposit funds via traditional channels; funds often don't arrive timely.
- Sharia-Compliant Finance: Avoids interest-bearing transactions.
- Gen Z: Light-credit banking; gamified investing; social features in finance.
- Cross-Border SMEs: High FX fees; slow settlement; working capital frozen.
- Crypto Degens: Participate in high-risk speculative trading via credit card bills.
- International Aid: Aid flows are slow, restricted by intermediaries, and lack transparency; significant funds lost to fees, corruption, and misallocation.
- Tandas / Rotating Savings Clubs: Cross-border savings for globalized families; pooled savings for yield; can build on-chain income history for credit.
- Luxury Dealers (e.g., Watch Dealers): Working capital locked in inventory; need short-term loans; conduct many high-value cross-border transactions; often transact via chat apps like WhatsApp and Telegram.
Conclusion
Over the past two decades, fintech innovation has largely focused on distribution, not infrastructure. Companies competed on branding, user onboarding, and paid acquisition, but the money itself still moved through the same closed payment networks. This expanded access to financial services but also led to homogenization, rising costs, and hard-to-escape thin margins.
Stablecoins promise to fundamentally change the economics of financial products. By turning custody, settlement, credit, and compliance into open, programmable software, they dramatically lower the fixed costs of launching and operating a fintech company. Functions that previously required reliance on sponsor banks, card networks, and vast vendor tech stacks can now be built directly on-chain, with significantly reduced operational costs.
When infrastructure becomes cheaper, focus becomes possible. Fintech companies no longer need millions of users to be profitable. Instead, they can focus on small, well-defined communities poorly served by one-size-fits-all products. Groups like athletes, adult creators, K-pop fans, or luxury watch dealers already share common cultural contexts, trust bases, and behavioral patterns, allowing products to spread more naturally through word-of-mouth rather than paid marketing.
Equally important, these communities often share similar cash flow patterns, risks, and financial decisions. This consistency allows product design to be optimized around how people actually earn, spend, and manage money, rather than abstract user personas. Word-of-mouth effectiveness comes not just from users knowing each other, but because the product genuinely fits how that group operates.
If this vision materializes, the economic shift would be profound. As distribution becomes more community-aligned, customer acquisition costs (CAC) will fall; and as intermediaries are reduced, profit margins will improve. Markets that once seemed too small or uneconomical will transform into durable, profitable business models.
In such a world, fintech advantage no longer relies on simple scale and high marketing spend, but shifts to deep understanding of user context. The success of the next generation of fintech won't lie in trying to serve everyone, but in serving specific groups exceptionally well, based on how money actually moves for them.
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