Global commerce is rapidly evolving, yet traditional payment systems are struggling to keep pace, remaining slow, costly, and often inaccessible. This has led to significant obstacles for both individuals and businesses, facing high transaction fees and lengthy settlement times.
For decades, outdated methods have hindered seamless cross-border money transfers, long before the advent of cryptocurrencies and, specifically, stablecoins. The drawbacks of conventional banking systems—delays, steep fees, and liquidity constraints—have become increasingly problematic.
Fortunately, the rise of stablecoins and on-chain liquidity providers is revolutionizing the landscape by enabling real-time and economical transactions.
Challenges of Traditional Payments for Businesses
From merchants in Africa to freelancers in Southeast Asia and businesses in Latin America, the implications of high fees and delays in cross-border payments are felt acutely. Traditional networks like SWIFT face criticism for their inefficiencies. While 66% of SWIFT transactions arrive within 24 hours, the transfer of funds without manual intervention can still take between one to three business days, with some transactions delaying for up to a month due to manual checks.
Moreover, the array of transaction fees associated with SWIFT transactions—such as sending and receiving fees, intermediary bank charges, and foreign exchange fees—exacerbates the problem.
Several factors contribute to these inefficiencies, including compliance checks and complications arising from multiple intermediary banks.
Limitations of Traditional Fintech Solutions
While digital payment platforms like Wise and PayPal have enhanced accessibility for many users in developed nations, they still rely on conventional financial infrastructures. As demand for efficient payment solutions grows—global cross-border settlements reached an astonishing $190.1 trillion in 2023 and are projected to exceed $290 trillion by 2030—traditional systems struggle to adapt.
Successful cross-border transactions often require navigating numerous layers of processing, each compounding delays and fees. For instance, a business in Nigeria receiving payments from Europe typically must convert funds multiple times—from euros to US dollars and then to naira—incurring additional costs in the process.
This scenario highlights the pressing need for a payment system that removes friction, offering businesses and individuals immediate access to real-time transactions and liquidity. The impressive growth of stablecoins, such as Tether (USDT), and on-chain liquidity providers illustrates this necessity.
Harnessing Stablecoins and On-Chain Liquidity Solutions
Unlike traditional banking systems, stablecoins—cryptocurrencies tied to a fiat asset like the US dollar—function around the clock without intermediaries, leveraging blockchain technology’s benefits of decentralization, transparency, and immutability.
Stablecoins have shown substantial growth, with USDT’s market capitalization increasing from $4.6 billion in March 2020 to over $142 billion currently. The overall stablecoin market cap has surpassed $230 billion, demonstrating the asset class’s effectiveness in facilitating efficient transactions.
However, stablecoins require sufficient liquidity to operate smoothly. Emerging solutions by digital payment infrastructure companies are enabling rapid, flawless global transactions through on-chain liquidity. By utilizing stablecoins alongside these solutions, instant, transparent transactions can be achieved without relying on traditional banks or payment networks.
For example, a supplier in Nigeria can receive USDT from a European buyer and instantly convert that into naira using available on-chain liquidity pools, eliminating multi-layer fees and minimizing transaction delays.
Through this approach, stablecoins and on-chain liquidity providers are already addressing the primary issues that traditional finance has failed to resolve: delays and high transaction costs.
The Underserved Markets Stand to Benefit Most
The real beneficiaries of stablecoin adoption are underserved regions such as Africa and Latin America. For example, Brazil’s net cryptocurrency imports reached $12.9 billion in the first nine months of 2024, reflecting a 60.7% increase from the previous year. Notably, nearly 70% of all crypto transactions in Brazil were conducted using stablecoins in 2024.
The increasing use of USDT for remittances and crypto-to-fiat conversions in emerging markets showcases users’ preference for stable, on-chain payment solutions over traditional banking options. Policymakers should consider integrating stablecoins and on-chain liquidity as solutions to enhance payment efficiency and financial inclusion for underserved populations.
The Future of Global Payments: Stablecoins Leading the Charge
Despite their rising popularity, stablecoins and on-chain liquidity providers are not intended as replacements for traditional financial institutions; rather, they aim to enhance them. The future of payments centers on speed, flexibility, and accessibility.
Financial services, payment providers, and enterprises are increasingly incorporating stablecoins into their operational frameworks. Recent developments, such as a notable international payment service accessing Japan’s local payment clearing system, exemplify how integrating stablecoins can significantly reduce cross-border transaction fees by removing intermediary banks.
The transition from traditional finance to stablecoins is not merely speculative; it is now occurring in response to growing demands for transparent, low-cost, and streamlined global transactions. The expansion of on-chain liquidity solutions is poised to lessen reliance on outdated banking systems.
