Multicoin: Why do we believe stablecoins will become FinTech 4.0?

Author: Spencer Applebaum & Eli Qian

Translation: Deep潮 TechFlow

Over the past twenty years, fintech has changed the way people access financial products, but it has not fundamentally altered the flow of funds.

Innovation has mainly focused on simpler interfaces, smoother user experiences, and more efficient distribution channels, while core financial infrastructure has remained largely unchanged.

For most of this period, the technology stack of fintech has been more about resale than reconstruction.

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 did not significantly improve efficiency. Companies like PayPal, E*TRADE, and Mint digitized existing financial products by combining traditional systems (such as ACH, SWIFT, and card networks established decades ago) with internet interfaces.

During this stage, fund settlement was slow, compliance processes relied on manual operations, and payment processing was constrained by strict schedules. Although this period brought financial services online, it did not fundamentally change the way funds flow. The only change was who could use these financial products, not how they operated.

Fintech 2.0: The New Banking Era (2010-2020)

The next breakthrough came with the proliferation of smartphones and social distribution. Chime offered early wage access for hourly workers; SoFi focused on student loan refinancing for high-potential graduates; Revolut and Nubank served low-income populations worldwide with user-friendly interfaces.

While each company told a more appealing story to specific audiences, they essentially sold the same products: checking accounts and debit cards running on old payment networks. They still relied on sponsor banks, card networks, and ACH systems, no different from their predecessors.

Their success was not because they built new payment networks but because they reached customers more effectively. Branding, user onboarding, and customer acquisition became their competitive advantages. In this stage, fintech companies became distribution-savvy entities dependent on banks.

Fintech 3.0: Embedded Finance (2020-2024)

Starting around 2020, embedded finance rapidly emerged. The popularity of APIs (Application Programming Interfaces) enabled nearly any software company to offer financial products. Marqeta allowed companies to issue cards via API; Synapse, Unit, and Treasury Prime provided Banking-as-a-Service (BaaS). Soon, almost every app could offer payments, cards, or loans.

However, behind these abstraction layers, there was no fundamental change. BaaS providers still depended on early-era sponsor banks, compliance frameworks, and payment networks. The abstraction shifted from banks to APIs, but economic benefits and control still reverted to traditional systems.

The Commodification of Fintech

By the early 2020s, the flaws of this model became apparent. Almost all major new banks relied on a small set of sponsor banks and BaaS providers.

Source: Embedded

Due to fierce competition through performance marketing, customer acquisition costs soared, profit margins shrank, fraud and compliance costs surged, and infrastructure became nearly indistinguishable. Competition turned into a marketing arms race. Many fintechs tried to differentiate through card colors, sign-up bonuses, and cashback offers.

Meanwhile, control over risk and value remained with banks. 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. Fintechs like Chime, Revolut, and Affirm lacked these privileges and depended on licensed banks to provide these services. Banks profited from interest spreads and platform fees; fintechs relied on interchange fees.

As fintech proliferated, regulators scrutinized the sponsor banks more strictly. Regulatory orders and increased oversight forced banks to invest heavily in compliance, risk management, and third-party supervision. For example, Cross River Bank faced a consent order from the FDIC; Green Dot Bank was subject to enforcement actions by the Federal Reserve; and the Fed issued cease and desist orders to Evolve Bank.

Banks responded by tightening onboarding processes, limiting supported projects, and slowing product iteration. The once-innovative environment now required larger scale to justify compliance costs. Growth in fintech became slower, more expensive, and more focused on launching mass-market products rather than niche solutions.

From our perspective, three main reasons explain why innovation has remained at the top of the tech stack over the past 20 years:

Monopoly and closed nature of payment infrastructure: Visa, Mastercard, and the Fed’s ACH network left little room for competition.

Startups need massive capital to launch core financial products: developing a regulated banking app can cost millions for compliance, fraud prevention, and fund management.

Regulatory restrictions on direct participation: only licensed entities can custody funds or move money through core payment networks.

Source: Statista

Given these constraints, it is wiser to focus on building products rather than directly challenging existing payment networks. As a result, most fintech companies have ended up as polished wrappers around bank APIs. Despite many innovations over the past two decades, truly new financial primitives have rarely emerged. For a long time, there have been few viable alternatives.

In contrast, the crypto industry has taken a completely different path. Developers have focused on building financial primitives from the ground up. From automated market makers (AMMs), bonding curves, perpetual contracts, liquidity vaults, to on-chain lending, all have evolved from foundational architecture. For the first time in history, financial logic itself has become programmable.

Fintech 4.0: Stablecoins and Permissionless Finance

Although the first three fintech eras introduced many innovations, the underlying flow of funds has changed little. Whether financial products are offered via traditional banks, new banks, or embedded APIs, funds still flow through closed, permissioned networks controlled by intermediaries.

Stablecoins have changed this paradigm. They no longer build on top of banks but directly replace core banking functions. Developers can interact directly with open, programmable networks. Payments settle on-chain, custody, lending, and compliance shift from contractual relationships to software-based processes.

While BaaS reduces friction, it does not alter the economic model. Fintechs still pay compliance fees to sponsor banks, settlement fees to card networks, and access fees to intermediaries. Infrastructure remains costly and limited.

Stablecoins eliminate the need for leasing access altogether. Developers no longer need to call bank APIs but can interact directly with open networks. Settlement occurs on-chain, with fees flowing to protocols rather than intermediaries. We believe this shift greatly lowers the cost barrier—from millions of dollars to develop with banks or tens of thousands with BaaS, down to just a few thousand dollars using permissionless on-chain smart contracts.

This transformation is already evident in large-scale applications. The market cap of stablecoins grew from near zero to about $300 billion in less than a decade. Even excluding transfers between exchanges and MEV (Maximal Extractable Value), the actual economic transaction volume processed exceeds that of traditional payment networks like PayPal and Visa. For the first time, non-bank, non-card payment networks can operate at a truly global scale.

Source: Artemis

To understand the significance of this shift in practice, we need to first understand how current fintech is built. Typical fintech companies rely on a complex vendor tech stack, including:

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

Building a fintech company on this stack means managing contracts, audits, incentives, and potential failure modes across dozens of partners. Each layer adds cost and delay, and many teams spend most of their time coordinating infrastructure rather than developing products.

In contrast, a stablecoin-based system greatly simplifies this complexity. Functions that previously required multiple vendors can now be implemented with a few on-chain primitives.

In a world centered on stablecoins and permissionless finance, the following changes are happening:

Banks and custody: Replaced by decentralized solutions like Altitude.

Payment networks: Replaced by stablecoins.

Identity & compliance: Still needed, but can be implemented on-chain with privacy-preserving tech like zkMe.

Underwriting and credit infrastructure: Fully reimagined and moved on-chain.

Capital markets firms: When all assets are tokenized, these become irrelevant.

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 in fintech 4.0 is that the underlying architecture of finance is finally starting to change. Instead of developing apps that silently seek permission from banks in the background, people now directly replace core banking functions with stablecoins and open payment networks. Developers are no longer tenants but true owners of the “land.”

Opportunities in Stablecoin-Focused Fintech

The first obvious impact of this shift is a dramatic increase in the number of fintech companies. When custody, lending, and fund transfers become nearly free and instant, launching a fintech becomes as simple as releasing a SaaS product. In a stablecoin-centric world, there’s no need for complex integrations with sponsor banks, no card issuance intermediaries, lengthy settlement processes, or redundant KYC checks slowing down progress.

We believe the fixed costs to create a core financial product will plummet from millions of dollars to just a few thousand. Once infrastructure, customer acquisition costs (CAC), and compliance barriers disappear, startups can profitably serve smaller, more specific communities through what we call “stabled-focused fintech.”

This trend has clear historical precedents. The previous generation of fintech companies initially gained traction by serving specific customer segments: SoFi with student loan refinancing, Chime with early wage access, Greenlight with debit cards for teens, Brex serving entrepreneurs unable to access traditional business credit. But this specialization did not become a sustainable operational model. Due to limited transaction fee revenue, rising compliance costs, and dependence on sponsor banks, these companies had to expand beyond their original niches. To survive, teams expanded horizontally, adding products that customers didn’t necessarily need, just to scale infrastructure and maintain viability.

Today, with crypto payment networks and permissionless APIs drastically lowering startup costs, a new wave of stablecoin neobanks will emerge, each targeting specific user groups, much like early fintech innovators. With significantly reduced operating costs, these new banks can focus on narrower, more specialized markets—such as Sharia-compliant finance, crypto enthusiasts’ lifestyles, or services tailored to athletes’ unique income and spending patterns.

More importantly, specialization can significantly optimize unit economics. Customer acquisition costs (CAC) decrease, cross-selling becomes easier, and the lifetime value (LTV) per customer increases. Focused fintech firms can precisely target niche communities that convert efficiently, gaining more word-of-mouth and organic growth. These companies spend less on operations but can extract more value from each customer than their predecessors.

When anyone can launch a fintech in weeks, the question shifts from “Who can reach customers?” to “Who truly understands them?”

Exploring the Design Space of Niche Fintech

The most attractive opportunities often lie where traditional payment networks fail.

For example, adult content creators and performers generate billions annually but are often “blacklisted” by banks and card processors due to reputation or refund risks. Their payments can be delayed by days or held up due to “compliance reviews,” and they often pay 10%-20% fees through high-risk gateways like Epoch, CCBill, etc. We believe stablecoin-based payments can offer instant, irreversible settlement, support programmable compliance, allow performers to custody their income, automatically allocate funds to tax or savings accounts, and receive global payments without relying on high-risk intermediaries.

Similarly, professional athletes—especially in individual sports like golf and tennis—face unique cash flow and risk dynamics. Their income is concentrated in short careers, often split with agents, coaches, and teams. They need to pay taxes across multiple jurisdictions, and injuries can halt income entirely. A stablecoin fintech can tokenize future earnings, pay team wages via multi-signature wallets, and automatically deduct taxes based on regional requirements.

Luxury goods and watch dealers are another market underserved by traditional financial infrastructure. They often transfer high-value inventory across borders, usually via wire transfer or high-risk processors, with six-figure transactions and days of settlement delays. Their liquidity is often locked in safes or display cases rather than bank accounts, making short-term financing expensive and hard to obtain. A stablecoin fintech can directly address these issues: providing instant settlement for large transactions, tokenized inventory-backed credit lines, and programmable escrow services with smart contracts.

Looking at enough of these cases, the same limitations repeatedly appear: traditional banks do not serve users with global, irregular, or non-traditional cash flows. But these groups can become profitable markets through stablecoin payment networks. Here are some compelling niche stablecoin fintech examples:

• Professional athletes: short careers, frequent travel and relocations, multi-jurisdictional taxes, paying coaches and agents, hedging injury risks.

• Adult performers and creators: excluded from banks and card processors; global audiences.

• Unicorn employees: cash-strapped, with net worth in illiquid equity; facing high taxes on options.

• On-chain developers: wealth concentrated in volatile tokens; facing fiat withdrawal and tax issues.

• Digital nomads: borderless banking, automatic FX conversions; regional tax automation; frequent travel.

• Prisoners: family or friends find deposits costly and difficult; funds often delayed.

• Sharia-compliant finance: avoiding interest-based transactions.

• Gen Z: light credit banking; gamified investing; social features.

• Cross-border SMEs: high FX costs; slow settlements; frozen working capital.

• Crypto enthusiasts (Degens): paying high-risk trading via credit card bills.

• International aid: slow, intermediary-limited, opaque fund flows; high fees, corruption, misallocation.

• Tandas / rotating savings clubs: cross-border savings for global families; pooled savings for yield; on-chain income history for credit scoring.

• Luxury goods dealers (e.g., watch dealers): liquidity locked in inventory; need short-term loans; high-value cross-border transactions; often via WhatsApp or Telegram.

Summary

Over the past twenty years, fintech innovation has mostly focused on distribution rather than infrastructure. Companies compete in branding, user onboarding, and paid customer acquisition, but funds still flow through the same closed payment networks. While this expanded financial access, it also led to homogenization, rising costs, and razor-thin margins.

Stablecoins are poised to revolutionize the economic model of financial products. By transforming custody, settlement, lending, and compliance into open, programmable software, they drastically reduce startup and operational costs. Functions that previously depended on sponsor banks, card networks, and large vendor stacks can now be built directly on-chain, with significantly lower operating expenses.

As infrastructure becomes cheaper, specialization becomes feasible. Fintech firms no longer need millions of users to be profitable. Instead, they can focus on niche, well-defined communities with specific needs—such as athletes, adult creators, K-pop fans, or luxury watch dealers—who already share cultural backgrounds, trust, and behaviors, enabling organic growth through word-of-mouth rather than paid marketing.

Equally important, these communities often share similar cash flow patterns, risks, and financial decision-making processes. This consistency allows product design to be tailored to actual income, expenses, and fund management practices, rather than abstract user profiles. Word-of-mouth effectiveness is enhanced because the product genuinely fits the community’s operational style.

If this vision becomes reality, this economic shift will be profound. As distribution becomes more community-aligned, customer acquisition costs (CAC) will fall; profit margins will rise with fewer intermediaries. Markets once deemed too small or unprofitable will become sustainable and lucrative.

In such a world, fintech’s advantage no longer relies on simple scale and marketing spend but on deep understanding of user backgrounds. The next generation of fintech success will be about providing exceptional services tailored to specific groups based on how funds actually flow.