Author: Spencer Applebaum & Eli Qian , Multicoin Capital
Compiled by: TechFlow TechFlow
Over the past two decades, fintech has changed how people access financial products, but it hasn’t really changed how money flows.
Innovations have primarily focused on simpler 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 technology stack was resold rather than rebuilt.
In general, 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 have digitized existing financial products by combining traditional systems, such as ACH, SWIFT, and card networks established decades ago, with internet interfaces.
During this phase, fund settlement was slow, compliance processes relied on manual operations, and payment processing was subject to strict timelines. While this period brought financial services online, it did not fundamentally change the way funds flowed. The only change was who could use these financial products, not how they actually operated.
Fintech 2.0: The New Era of Banking (2010-2020)
The next breakthrough comes from the widespread adoption of smartphones and socialized distribution. Chime offers early paychecks to hourly workers; SoFi focuses on providing student loan refinancing for graduates with upward mobility; and Revolut and Nubank serve underserved populations globally through user-friendly interfaces.
While each company tells a more compelling story to a specific audience, they are essentially selling the same products: checking accounts and debit cards running on legacy payment networks. They still rely on sponsoring banks, card networks, and the ACH system, just like their predecessors.
These companies succeeded not because they built new payment networks, but because they better reached their customers. Brand, user onboarding, and customer acquisition became their competitive advantages. At this stage, fintech companies became skilled distribution entities dependent on banks.
Fintech 3.0: Embedded Finance (2020-2024)
Starting around 2020, embedded finance rapidly emerged. The proliferation of APIs (Application Programming Interfaces) enabled virtually 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, almost every application could offer payment, card, or loan services.
However, behind these layers of abstraction, nothing fundamentally changes. BaaS service providers still rely on early-era sponsoring banks, compliance frameworks, and payment networks. The abstraction layer has shifted from banks to APIs, but the economic benefits and control have returned to the traditional system.
The commodification of financial technology
By the early 2020s, the flaws in this model became increasingly apparent. Almost all major new banks relied on the same small group of sponsoring banks and BaaS service providers.
Source: Embedded
As companies fiercely compete through performance marketing, customer acquisition costs have skyrocketed, profit margins have been squeezed, fraud and compliance costs have surged, and infrastructure has become almost indistinguishable. The competition has devolved into a marketing arms race. Many fintech companies are attempting to differentiate themselves through card colors, sign-up rewards, and cashback gimmicks.
Meanwhile, risk and value control is concentrated at the banking level. Large institutions like JPMorgan Chase and Bank of America, regulated by the Office of the Comptroller of the Currency (OCC), retain core privileges: accepting deposits, issuing loans, and accessing federal payment networks such as ACH and Fedwire. Fintech companies like Chime, Revolut, and Affirm lack these privileges and must rely on licensed banks to provide these services. Banks profit from interest rate spreads and platform fees; fintech companies profit from transaction fees.
With the proliferation of fintech projects, regulators are subjecting increasingly stringent scrutiny of the banks that sponsor them. Regulatory orders and heightened oversight expectations are forcing banks to invest heavily in compliance, risk management, and the supervision of third-party projects. For example, Cross River Bank received a compliance order from the Federal Deposit Insurance Corporation (FDIC); Green Dot Bank was subject to enforcement action by the Federal Reserve System; and the FDIC issued a cease and desist order against Evolve Bank.
Banks responded by tightening customer onboarding processes, limiting the number of projects supported, and slowing product iteration. The environment that once fostered innovation now requires greater scale to justify compliance costs. Growth in the fintech industry has become slower, more expensive, and more inclined to launch generic products for a broad user base rather than products focused on specific needs.
From our perspective, there are three main reasons why innovation has remained at the top of the technology stack over the past 20 years:
- The infrastructure for fund flows is monopolized and closed : Visa, Mastercard, and the Federal Reserve's ACH network leave almost no room for competition.
- Startups need substantial capital to launch financial products : developing a regulated banking app requires millions of dollars for compliance, fraud prevention, and fund management.
- The regulations restrict direct participation : only licensed institutions can hold funds in custody or facilitate fund flows through the core payment network.
Source: Statista
Given these constraints, it's wiser to focus on product development rather than directly challenging existing payment networks. As a result, most fintech companies end up merely elegant wrappers around bank APIs. Despite numerous innovations in fintech over the past two decades, truly new financial primitives have rarely emerged. For a long time, there have been virtually no viable alternatives.
The crypto industry, however, took a completely different path. Developers focused first on building financial primitives. From Automated Market Makers (AMMs), bonding curves, perpetual contracts, liquidity vaults to on-chain lending, all of these evolved gradually from the underlying architecture. For the first time in history, financial logic itself became programmable.
Fintech 4.0: Stablecoins and Permissionless Finance
Despite the numerous innovations achieved in the first three fintech eras, the underlying infrastructure for fund flows has remained largely unchanged. Regardless of whether financial products are offered through traditional banks, new types of banks, or embedded APIs, funds still flow through closed, permissioned networks controlled by intermediaries.
Stablecoins have revolutionized this model. Instead of building software on top of banks, they directly replace core banking functions. Developers can interact directly with open, programmable networks. Payments are settled on-chain, and custody, lending, and compliance are transformed from traditional contractual relationships into software-based processes.
While Bank as a Service (BaaS) has reduced friction, it hasn't changed the economic model. Fintech companies still have to pay compliance fees to sponsoring banks, settlement fees to card networks, and access fees to intermediaries. Infrastructure remains expensive and constrained.
Stablecoins completely eliminate the need for leasing access. Developers don't need to call bank APIs; instead, they interact directly with the open network. Settlement is done directly on-chain, with fees flowing to the protocol rather than through intermediaries. We believe this shift dramatically lowers the cost barrier—from millions of dollars to develop through banks or hundreds of thousands of dollars through BaaS, to just a few thousand dollars through permissionless on-chain smart contracts.
This shift is already evident in large-scale applications. The market capitalization of stablecoins has grown from near zero to approximately $300 billion in less than a decade, and even excluding inter-exchange transfers and maximum withdrawable value (MEV), the actual volume of economic transactions they handle has surpassed that of traditional payment networks such as PayPal and Visa. For the first time, a situation has emerged where non-bank, non-card payment networks can truly achieve global-scale operations.
Source: Artemis
To understand the practical significance of this shift, we need to first understand how fintech is currently built. A typical fintech company relies on a large vendor technology stack, including the following layers:
- User Interface/User Experience (UI/UX)
- Banks and Custodians : Evolve, Cross River, Synapse, Treasury Prime
- Payment networks : ACH, Wire, SWIFT, Visa, Mastercard
- Identity and Compliance : Ally, Persona, Sardine
- Fraud prevention : SentiLink, Socule, Feedzai
- Underwriting/credit infrastructure : Plaid, Argyle, Pinwheel
- Risk and capital management infrastructure : Alloy, Unit 21
- Capital Markets : Prime Trust, DriveWealth
- Data aggregation : Plaid, MX
- Compliance/Reporting : FinCEN, OFAC Inspections
Starting a fintech company on this technology stack means managing contracts, audits, incentive mechanisms, and potential failure modes for dozens of partners. Each layer adds to costs and delays, and many teams spend almost all their time coordinating infrastructure rather than focusing on product development.
Stablecoin-based systems significantly simplify this complexity. Functionality that previously required multiple providers can now be achieved using a small number of on-chain primitives.
In a world centered on stablecoins and permissionless finance, the following changes are taking place:
- Banks and custody services : being replaced by decentralized solutions such as Altitude.
- Payment network : replaced by stablecoins.
- Identity and compliance : Still needed, but we believe this can be achieved on-chain and kept confidential and secure through technologies such as zkMe.
- Underwriting and credit infrastructure : radically innovated and moved on-chain.
- Capital Markets Companies : These companies will become irrelevant when all assets are tokenized.
- Data aggregation : replaced by on-chain data and selective transparency (e.g., through 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 will not be able to interact with the protocol).
The real difference with FinTech 4.0 lies in the fact that the underlying architecture of finance is finally beginning to change. Instead of developing an application that needs to secretly seek permission from banks in the background, people are now directly replacing the core functions of banks with stablecoins and open payment networks. Developers are no longer tenants, but have become the true owners of the "land."
Opportunities in Fintech Focused on Stablecoins
The first layer of impact from this shift is obvious: the number of fintech companies will increase dramatically. When custody, lending, and money transfers become virtually free and instantaneous, starting a fintech company will be as simple as launching a SaaS product. In a world centered around stablecoins, there will be no more complex integrations with sponsoring banks, nor will there be card-issuing intermediaries, time-consuming clearing processes, or redundant KYC (Know Your Customer) checks to slow things down.
We believe that the fixed cost of creating a financial technology product at its core will plummet from millions of dollars to thousands of dollars. Once infrastructure, customer acquisition costs (CAC), and compliance barriers disappear, startups will be able to profitably serve smaller, more specific social groups through what we call "stablecoin-focused fintech."
This trend has clear historical precedents. Previous generations of fintech companies initially gained prominence by serving specific customer segments: SoFi focused on student loan refinancing, Chime offered early payroll, Greenlight launched debit cards for teenagers, and Brex served entrepreneurs unable to access traditional commercial credit. However, this focused model did not become a sustainable operating model. Limited transaction fee revenue, rising compliance costs, and reliance on sponsoring banks forced these companies to expand beyond their original niches. To survive, teams were forced to expand horizontally, adding products that users didn't actually need, simply to scale the infrastructure for viability.
Now, thanks to crypto payment networks and permissionless financial APIs that have drastically reduced startup costs, a new wave of stablecoin neobanks is emerging, each targeting specific user groups, much like early fintech innovators. With significantly lower operating costs, these new banks can focus on narrower, more specialized markets and maintain their focus, such as Sharia-compliant finance, the lifestyle of cryptocurrency enthusiasts, or services designed specifically for the unique income and spending patterns of athletes.
More importantly, specialization significantly optimizes unit economics. Customer acquisition costs (CAC) decrease, cross-selling becomes easier, and the lifetime value (LTV) of each customer increases. Focused fintech companies can precisely target their products and marketing to niche groups with high conversion rates and gain more word-of-mouth by serving specific user groups. These companies spend less on operations but are able to generate more revenue from each customer more easily than previous generations of fintech companies.
When anyone can launch a fintech company in a few weeks, the question will shift from "Who can reach the customers?" to "Who truly understands the customers?"
Exploring the design space of focused fintech
The most attractive opportunities often arise where traditional payment networks fail.
For example, adult content creators and performers generate billions of dollars in revenue annually, yet are frequently blocked by banks and card payment processors due to reputational or refund risks. Their earnings payments may be delayed by days, or even withheld due to "compliance reviews," and they typically incur 10-20% fees through high-risk payment gateways such as Epoch and CCBill. We believe that stablecoin-based payments can provide instant, irreversible settlement, support programmable compliance, allow performers to self-manage their income, automatically allocate earnings to tax or savings accounts, and receive payments globally without relying on high-risk intermediaries.
Let's look at professional athletes, especially those in individual sports like golf and tennis, who face unique cash flow and risk dynamics. Their income is concentrated in a short career and is typically shared with agents, coaches, and team members. They are required to pay taxes in multiple states and countries, and injuries can completely interrupt their income streams. A stablecoin-based fintech company could help them tokenize future income, pay team salaries using multi-signature wallets, and automatically withhold taxes based on the tax requirements of different regions.
Luxury goods and watch dealerships represent another market where traditional financial infrastructure is poorly served. These businesses frequently move high-value inventory across borders, often completing six-figure transactions via wire transfers or high-risk payment processors, while also waiting for settlement times of several days. Their liquidity is often locked in vaults or display cases of inventory rather than in bank accounts, making short-term financing both expensive and difficult to obtain. We believe a stablecoin-based fintech company can directly address these issues: providing instant settlement for large transactions, lines of credit secured by tokenized inventory, and programmable custody services with built-in smart contracts.
When you examine enough of these cases, the same limitations reappear: traditional banks don't serve users with global, irregular, or unconventional cash flows. However, these groups can become profitable markets through stablecoin payment networks. Below are some theoretical case studies of focused stablecoin fintech that we believe are attractive:
- Professional athletes : Their income is concentrated in a short career; they often need to travel and relocate; they may need to file taxes in multiple jurisdictions; they need to pay salaries to coaches, agents, trainers, etc.; and they may want to hedge against the risk of injury.
- Adult performers and creators : excluded by banks and card payment processing institutions; audiences span the globe.
- Unicorn company employees : cash shortages, net assets concentrated in illiquid equity; may face high taxes when exercising stock options.
- On-chain developers : Net assets are concentrated in highly volatile tokens; they face issues with fiat currency withdrawals and taxes.
- Digital nomads : Passport-free banking, automatic foreign exchange; location-based automated tax processing; frequent travel and relocation.
- Prisoners : It is difficult and expensive for family or friends to deposit money for them through traditional channels; funds often do not arrive in time.
- Financial services compliant with Sharia law : Avoid interest transactions.
- Generation Z : Light credit banking services; investing through gamification; financial services with social features.
- Cross-border SMEs : High foreign exchange costs; slow settlement; frozen working capital.
- Cryptocurrency enthusiasts (Degens) : Engaging in high-risk speculative transactions by paying with credit card bills.
- International aid : Aid funds flow slowly, are subject to intermediaries, and have low transparency; significant losses are caused by fees, corruption, and misallocation of resources.
- Tandas / Rotating Savings Club : Provides cross-border savings services for global families; pool savings to earn returns; income history can be built on-chain for credit assessment.
- Luxury goods dealers (such as watch dealers) : have their working capital locked up in inventory; require short-term loans; conduct a large number of high-value cross-border transactions; and frequently complete transactions through chat applications such as WhatsApp and Telegram.
Summarize
Over the past two decades, fintech innovation has largely focused on distribution rather than infrastructure. Companies have competed on brand marketing, user onboarding, and paid customer acquisition, but the money itself still flows through the same closed payment networks. While this has expanded the reach of financial services, it has also led to homogenization, rising costs, and persistently thin profit margins.
Stablecoins have the potential to revolutionize the economic model of financial products. By transforming functions such as custody, settlement, lending, and compliance into open, programmable software, they significantly reduce the fixed costs of starting and operating fintech companies. Functions that previously required sponsoring banks, card networks, and massive vendor technology stacks can now be built directly on-chain, drastically reducing operational costs.
As infrastructure becomes cheaper, focus becomes possible. Fintech companies no longer need millions of users to be profitable. Instead, they can focus on niche, well-defined communities where one-size-fits-all products struggle to meet their needs. These groups, such as athletes, adult creators, K-pop fans, or luxury watch dealers, already share common cultural backgrounds, trust foundations, and behavioral patterns, allowing products to spread more naturally through word-of-mouth rather than relying on paid marketing.
Equally important, these communities typically share similar cash flow patterns, risk profiles, and financial decision-making. This consistency allows product design to be optimized around people's actual income, spending, and money management habits, rather than abstract user profiles. The effectiveness of word-of-mouth marketing stems not only from mutual understanding among users but also from the fact that the product truly aligns with the group's operating methods.
If this vision becomes a reality, the economic transformation will be profound. As distribution becomes more community-centric, customer acquisition costs (CAC) will decrease; and as intermediaries are reduced, profit margins will increase. Markets that once seemed too small or unprofitable will transform into sustainable and profitable business models.
In such a world, the advantage of fintech no longer relies on simple scaling and high marketing expenditures, but rather on a deep understanding of user backgrounds. The success of the next generation of fintech lies not in trying to serve everyone, but in providing exceptional service to specific groups based on the actual flow of funds.
