Over the past two decades, fintech has changed how people access financial products, but it has not changed the actual flow of funds. Innovation has primarily focused on simpler interfaces, smoother onboarding processes, and more efficient distribution channels, while the core financial infrastructure has remained largely unchanged. For most of this time, this technology stack has been resold rather than rebuilt.
Article by: Multicoin Capital
Source: ChainCatcher
Overall, the development of fintech can be divided into four stages:
Fintech 1.0: Digital Issuance (2000-2010)
The earliest waves of fintech made financial services more accessible, but efficiency did not improve significantly. Companies like PayPal, E*TRADE, and Mint digitized existing products by integrating traditional systems established decades ago (like ACH, SWIFT, and card networks) with internet interfaces.
Settlements are slow, compliance processes rely on manual intervention, and payments are strictly according to predetermined schedules. During this period, the financial industry achieved online operations, but the flow of funds did not fundamentally change. What changed was who could use financial products, not how these products themselves operated.
Fintech 2.0: The New Banking Era (2010-2020)
The next breakthrough comes from smartphones and social media. Chime targets hourly workers who can access their paychecks early; SoFi focuses on providing student loan refinancing for aspiring graduates; Revolut and Nubank have reached underserved consumers globally with user-friendly experiences.
Each company tells a more compelling story for a particular audience, but they all sell essentially the same products: checking accounts and debit cards that run on the same traditional systems. They rely on sponsoring banks, card organizations, and ACH systems.
These companies succeed not because they build new channels, but because they reach customers better. Branding, user guidance, and customer acquisition are their strengths. Fintech companies of this era have turned into technologically skilled distribution businesses that depend on banks.
Fintech 3.0: Embedded Finance (2020-2024)
Around 2020, embedded finance began to thrive. APIs allowed nearly every software company to offer financial products: Marqeta enables companies to issue debit cards through APIs; Synapse, Unit, and Treasury Prime provide banking as a service. Soon, almost all applications can offer payment, debit card, or loan services.
But beneath the abstraction, the essence remains unchanged. Banking as a Service (BaaS) providers still rely on those previous banks, compliance frameworks, and payment channels. The abstraction layer has risen from banks to APIs, but the economic benefits and control still flow to the original systems.
The commoditization of fintech
By the early 2020s, the drawbacks of this model were evident everywhere. Almost all large new banks relied on a few sponsoring banks and banking as a service (BaaS) providers.
Source: Embedded
As companies engage in fierce competition through performance marketing, customer acquisition costs soar. Profit margins are compressed, fraud and compliance costs escalate, and infrastructure has become almost homogeneous, turning competition into a marketing arms race, with many fintech companies attempting to stand out through card colors, signup bonuses, and cashback gimmicks.
Meanwhile, risk and value capture concentrate at the banking level. Large financial institutions regulated by the OCC, such as JPMorgan and Bank of America, retain core privileges: accepting deposits, issuing loans, and accessing federal payment systems like ACH and Fedwire, while fintech companies like Chime, Revolut, and Affirm lack these privileges and must rely on licensed banks for these services. Banks earn interest and platform fees; fintech companies earn transaction fees.
With the surge in fintech projects, regulatory scrutiny of the initiating banks supporting these projects has also intensified. The issuance of regulatory orders and rising regulatory requirements forces banks to invest heavily in compliance, risk management, and oversight of third-party projects. For instance, Cross River Bank has reached a regulatory order with the FDIC, Green Dot Bank has faced enforcement actions from the Federal Reserve, and the Federal Reserve has issued a cease-and-desist order to Evolve.
The banks' response includes tightening customer onboarding processes, limiting the number of supported projects, and slowing product iteration speed. Models that once allowed for experimental attempts now increasingly require scale effects to offset compliance burdens. The pace of fintech development slows, costs rise, and there's a greater tendency to develop generic products rather than specialized ones.
We believe there are three main reasons why innovation has consistently been ahead over the past 20 years.
1. The flow of funds infrastructure is monopolized and closed. Visa, Mastercard, and the Federal Reserve's ACH network leave no room for competition.
2. Startups need substantial funding to develop finance-centric products. Launching a regulated banking application requires millions of dollars for compliance, anti-fraud, fund operations, etc.
3. Regulation limits direct participation. Only licensed institutions can custody funds or transfer funds through core channels.
Data source: Statista
Given these constraints, developing products makes far more sense than fighting against established rules. The result is that most fintech companies are merely refining bank APIs. Despite two decades of innovation, the industry has seen very few genuinely new financial technologies emerge. For a long time, there have been no viable alternatives.
The trajectory of cryptocurrency development is entirely different. Developers initially focused on core functionalities, such as automated market makers, bond curves, perpetual contracts, liquidity vaults, and on-chain credit, all gradually evolving from the ground up. The financial logic itself has also achieved programmability for the first time.
Fintech 4.0: Stablecoins and Permissionless Finance
Despite numerous innovations emerging in the first three fintech eras, the underlying mechanisms have changed little. Whether products are delivered through banks, new banks, or embedded APIs, the flow of funds still follows closed, permissioned tracks controlled by intermediaries.
Stablecoins break this model. Stablecoins do not layer software on top of the banking system; instead, they directly replace key banking functions: developers interact with an open, programmable network; payments settle on-chain; functions like custody, lending, and compliance shift from contractual relationships to software layers.
Banking as a Service (BaaS) reduces friction but does not change the economic model. Fintech companies still need to pay compliance fees to sponsoring banks, settlement fees to card organizations, and access fees to intermediaries. Infrastructure remains expensive and requires licensing.
Stablecoins eliminate the need to rent access. Developers do not need to call bank APIs but can write code directly to an open network; settlements occur directly on-chain; fees belong to the protocol, not intermediaries. We believe that the cost of building will significantly decrease: from millions of dollars when built through banks or hundreds of thousands through blockchain as a service (BaaS) to just thousands when built on-chain using permissionless smart contracts.
This transformation has manifested at scale. The market capitalization of stablecoins has grown from nearly zero to about $300 billion in less than a decade, and its actual economic transaction volume even surpasses traditional payment networks like PayPal and Visa, even excluding internal transfers and MEV transactions. Non-bank, non-card payment channels have achieved true global scale operation for the first time.
Source: Artemis
To understand why this transformation is so important in practice, we need to understand how today's fintech companies are constructed.
1. User interface/user experience
2. Banking/custody layer - Evolve, Cross River, Synapse, Treasury Prime
3. Payment channels - ACH, Wire, SWIFT, Visa, Mastercard
4. Identity and compliance - Ally, Persona, Sardine
5. Fraud prevention - SentiLink, Socure, Feedzai
6. Underwriting/lending infrastructure - Plaid, Argyle, Pinwheel
7. Risk and financial infrastructure - Alloy, Unit21
8. Capital markets - Prime Trust, DriveWealth
9. Data aggregation - Plaid, MX
10. Compliance/reporting - Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets Control (OFAC) checks
Launching fintech products within this architecture means managing contracts, audits, incentive mechanisms, and failure modes involving dozens of counterparties, with each layer adding costs and delays. Many teams spend as much time coordinating infrastructure as they do on product development.
The stablecoin-native system simplifies this complexity, consolidating functionalities that previously required six vendors into a single set of on-chain primitives.
In a world of stablecoins and permissionless finance, banks and custody services will be replaced by Altitude; payment channels will be replaced by stablecoins; identity verification and compliance are certainly important, but we believe they can exist on-chain and maintain confidentiality and security through technologies like zkMe; underwriting and lending infrastructure will be completely reformed and shifted on-chain; when all assets are tokenized, capital market companies will become irrelevant; data aggregation will be supplanted by on-chain data and selective transparency, such as using fully homomorphic encryption (FHE) technology; compliance and OFAC compliance will be handled at the wallet level (e.g., if Alice's wallet is on the sanctions list, she will not be able to interact with the protocol).
This is where fintech 4.0 truly differs: the underlying architecture of finance has finally changed. People no longer need to develop another application that stealthily requests bank authorization in the background; instead, they directly replace much of the bank's business with stablecoins and open payment channels. Developers are no longer tenants; they own the land.
Opportunities for specialized stablecoin fintech companies
The most direct impact of this transformation is evident: the number of fintech companies will increase dramatically. When custody, lending, and fund transfers are almost free and instant, starting a fintech company is akin to launching a SaaS product. In a stablecoin-native environment, there’s no need to interface with card issuers, wait days for settlement windows, or undergo tedious KYC checks, all of which will not hinder your growth.
We believe that the fixed costs of launching fintech products centered on finance will drop sharply from millions of dollars to thousands. Once the infrastructure, customer acquisition costs (CAC), and compliance barriers disappear, startups will be able to provide profitable services to smaller, more specific social groups through what we call specialized stablecoin fintech.
There is a clear historical parallel here. The previous generation of fintech companies initially served specific customer groups: SoFi provided student loan refinancing services, Chime offered early paycheck access, Greenlight provided debit cards for teens, and Brex served entrepreneurs who could not access traditional business credit. However, this specialization model ultimately failed to become a sustainable operating model, as transaction fees limited revenue and compliance costs rose accordingly. The dependency on initiating banks forced companies to expand their business scope, moving beyond their initial niche markets. To survive, teams were compelled to expand horizontally, and the products ultimately launched were not driven by user demand but by the need for infrastructure to scale to maintain operations.
As cryptocurrency infrastructure and permissionless financial APIs drastically lower startup costs, a new generation of stablecoin neo-banks will emerge, targeting specific user groups just like early fintech innovators. With significantly reduced operating costs, these neo-banks can focus on more segmented, specialized markets while maintaining their expertise: for example, Islamic-compliant financial services, lifestyles of cryptocurrency enthusiasts, or groups of athletes with unique income and spending patterns.
The second-order effect is more significant: specialization can enhance unit economics. Customer acquisition costs (CAC) decrease, cross-selling becomes more convenient, and the lifetime value (LTV) per customer increases. Specialized fintech companies can precisely match products and marketing with high-conversion target groups, gaining more word-of-mouth marketing by serving specific demographics. Compared to the previous generation of fintech companies, these businesses have lower operating costs but clearer profitability per customer.
When anyone can launch a fintech company in a few weeks, the question shifts from 'Who can reach customers?' to 'Who truly understands them?'
Exploring the design space of specialized fintech
The places where traditional systems collapse or break apart often give rise to the most attractive opportunities.
Take adult content creators and performers as an example. They generate billions of dollars in revenue annually but are often taken down by banks and credit card processors due to reputational and chargeback risks. Payments can be delayed for days, withheld under the guise of 'compliance review,' and typically incur fees of 10% to 20% through high-risk payment gateways like Epoch and CCBill. We believe that a stablecoin-based payment method can provide instant, irreversible settlements and programmable compliance, enabling performers to securely manage their income, automatically allocate it to tax or savings wallets, and receive payments globally without relying on high-risk intermediaries.
Now consider professional athletes, especially in individual sports like golf and tennis, who face unique cash flow and risk dynamics. Their income is concentrated in a short career span and typically needs to be allocated to agents, coaches, and staff. They need to pay taxes in multiple states and countries, and injuries can completely disrupt their income. A stablecoin-based fintech product can help them tokenize future earnings, pay employees using multi-signature wallets, and automatically withhold taxes by jurisdiction.
Luxury goods and watch dealers are another market case where traditional financial infrastructure is underserved. These businesses often transport high-value inventory across borders, with transaction amounts often reaching six figures, and typically transact via wire transfers or high-risk payment processors, with settlements taking days. Working capital is often tied up in inventory stored in safes or display cases rather than in bank accounts, making short-term financing both expensive and difficult to obtain. We believe that stablecoin-based fintech can directly address these challenges: enable instant settlements for large transactions, provide credit lines secured by tokenized inventory, and offer programmable custody features built into smart contracts.
When you study enough cases, you find the same constraints recurring: the banking operation model does not suit serving users with global, uneven, or unconventional cash flows. But these groups can develop into profitable markets through stablecoin platforms. We believe that some theoretically specialized stablecoin fintech company cases are quite attractive, such as:
1. Professional athletes: income concentrated in short timeframes; frequent travel and relocations; may need to pay taxes in multiple jurisdictions; payroll includes coaches, agents, trainers, etc.; may want to hedge against injury risks.
2. Adult performers and creators: barred by banks and credit card processors; audiences spread worldwide.
3. Employees of unicorn companies: cash 'shortage', with net worth concentrated in illiquid stocks; exercising options may incur high taxes.
4. On-chain developers: net worth concentrated in highly volatile tokens; face challenges regarding exit and taxes.
5. Digital nomads: use banks for automatic foreign exchange without a passport; automatic tax processing based on location; frequent travel/moving.
6. Prisoners: family/friends struggle to provide necessary assistance in the prison system, and costs are high; funds are often inaccessible through traditional channels.
7. Compliant with Islamic law: avoiding interest.
8. Generation Z: light credit banking services; gamified investments; social features.
9. Cross-border SMEs: high foreign exchange costs; slow settlements; working capital frozen.
10. Gamblers: using credit cards to place bets on roulette.
11. Foreign aid: aid funds flow slowly, require intermediaries, and are opaque; large amounts of funds are lost due to fees, corruption, and mismatches.
12. Tandas/rotating savings clubs: default cross-border, suitable for global families; pooled savings can earn returns; the potential to establish income records on the credit chain for credit access.
13. Luxury goods dealers (e.g., watch dealers): working capital tied up in inventory; need short-term loans; conduct many high-value cross-border transactions; frequently transact via chat applications like WhatsApp and Telegram.
Summary
For most of the past two decades, fintech innovation has focused more on distribution channels than on building infrastructure. Companies compete in brand building, user registration, and paid customer acquisition, but the flow of funds itself still occurs along closed channels. This has expanded the reach of financial services but has also led to commoditization, rising costs, and thin profits that are hard to escape.
Stablecoins are expected to change the economic model of financial product development. By transforming functions like custody, settlement, lending, and compliance into open, programmable software, they significantly lower the fixed costs of launching and operating fintech companies. Features that previously required sponsoring banks, card organizations, and large vendor systems can now be built directly on-chain, greatly reducing overhead.
As infrastructure costs decrease, specialization becomes possible. Fintech companies no longer need millions of users to be profitable. Instead, they can focus on niche, clearly defined communities whose needs are challenging to meet with 'one-size-fits-all' products. Groups like athletes, adult content creators, K-Pop fans, or luxury watch dealers inherently share common backgrounds, trust, and behavior patterns, making products easier to spread organically rather than relying on paid marketing.
Equally important, these communities often share similar cash flow situations, risk tolerances, and financial decision-making. This consistency allows for product design to revolve around people's actual income, spending, and financial management methods, rather than abstract demographic categories. Word-of-mouth marketing is effective not only because users know each other but also because the product truly fits the community's operational methods.
If our vision becomes a reality, economic transformation will be significant. As distribution channels integrate into communities, customer acquisition costs (CAC) decrease; with fewer intermediaries, profit margins expand. Markets that were once too small or unprofitable will transform into sustainable and profitable enterprises.
In this world, the advantages of fintech no longer lie in brute-force scaling and massive marketing spending, but in a profound understanding of real-world contexts. Next-generation fintech companies will not win by serving everyone, but by providing exceptional quality services to specific groups, built on the actual flow of funds, thus winning the market.
