Source: Multicoin Capital

Translation: Zhou, ChainCatcher

Over the past two decades, fintech has changed the way people access financial products, but it has not altered the actual flow of funds. Innovation has primarily focused on more streamlined interfaces, smoother registration processes, and more efficient distribution channels, while the core financial infrastructure has largely remained unchanged. For most of this time, this technology stack has simply been resold rather than rebuilt.

Overall, the development of fintech can be divided into four stages:

Fintech 1.0: Digital Issuance (2000-2010)

The earliest wave of fintech made financial services more accessible, but efficiency did not significantly improve. Companies like PayPal, E*TRADE, and Mint digitized existing products by combining traditional systems established decades ago (such as ACH, SWIFT, and card networks) with internet interfaces.

Settlements were slow, compliance processes relied on manual efforts, and payments were strictly scheduled. Although the financial industry went online during this period, the fundamental way funds flowed did not change. What changed was who could use financial products, not how those products operated.

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

The next breakthrough came from smartphones and social media. Chime targeted hourly workers who could access their wages early; SoFi focused on refinancing student loans for aspiring graduates; Revolut and Nubank reached underserved consumers globally with user-friendly experiences.

Each company told a more compelling story to a specific audience, but they were all selling essentially the same products: checking accounts and debit cards operating on the same traditional systems. They relied on sponsoring banks, card organizations, and ACH systems.

These companies succeeded not because they built new channels, but because they better reached customers. Branding, user guidance, and customer acquisition were their advantages. Fintech companies of this era became tech-savvy distribution enterprises dependent on banks.

Fintech 3.0: Embedded Finance (2020-2024)

Around 2020, embedded finance began to flourish. APIs enabled almost all software companies to offer financial products: Marqeta allowed companies to issue debit cards via API; Synapse, Unit, and Treasury Prime provided banking as a service. Soon, almost all applications could offer payment, debit card, or loan services.

But beneath the abstraction, the essence did not change. Banking as a Service (BaaS) providers still relied on those earlier banks, compliance frameworks, and payment channels. The abstraction layer was elevated from banks to APIs, but economic benefits and control still flowed to the original systems.

The Commoditization of Fintech

By the early 2020s, the drawbacks of this model were evident. Almost all large neobanks relied on a few sponsoring banks and BaaS providers.

Source: Embedded

As companies engaged in fierce competition through performance marketing, customer acquisition costs soared. Profit margins were squeezed, fraud and compliance costs surged, infrastructure became nearly identical, and competition evolved into a marketing arms race, with many fintech companies trying to stand out through card colors, signup bonuses, and cashback gimmicks.

Meanwhile, risk and value acquisition concentrated at the bank level. Large financial institutions regulated by the Office of the Comptroller of the Currency (OCC), such as JPMorgan Chase and Bank of America, retained core privileges: accepting deposits, issuing loans, and accessing federal payment systems like ACH and Fedwire, while fintech companies like Chime, Revolut, and Affirm lacked these privileges and had to rely on licensed banks for these services. Banks earned interest and platform fees; fintech companies earned transaction fees.

With the surge in fintech projects, regulators increasingly scrutinized the sponsoring banks behind these projects. The issuance of regulatory orders and heightened regulatory requirements forced banks to invest heavily in compliance, risk management, and oversight of third-party projects. For example, Cross River Bank reached a regulatory order with the Federal Deposit Insurance Corporation (FDIC), Green Dot Bank faced enforcement action from the Federal Reserve, and the Federal Reserve issued a cease-and-desist order to Evolve.

Banks responded by tightening customer onboarding processes, limiting the number of supported projects, and slowing product iteration speeds. Models that once allowed for experimental attempts now increasingly required economies of scale to offset compliance burdens. The pace of fintech development slowed, costs rose, and there was a greater tendency to develop generic products rather than specialized ones.

We believe there are three main reasons why innovation has consistently been at the forefront over the past 20 years.

• 1. The infrastructure for the flow of funds is monopolized and closed. Visa, Mastercard, and the Federal Reserve's ACH network left no room for competition.
• 2. Startups require significant funding to develop finance-centric products. Launching a regulated banking application requires millions of dollars for compliance, anti-fraud measures, capital operations, and more.
• 3. Regulation limits direct participation. Only licensed institutions can hold funds or transfer money through core channels.

Data Source: Statista

Given these constraints, it makes more sense to develop products rather than fight established rules. The result is that most fintech companies are merely refining bank APIs. Despite two decades of innovation, the industry has seen few truly new financial technologies emerge. For a long time, there have been no viable alternatives.

The trajectory of cryptocurrency development, however, is entirely different. Developers initially focused on foundational functionalities, such as automated market makers, bond curves, perpetual contracts, liquidity pools, and on-chain credit, which gradually developed from the ground up. The financial logic itself also achieved programmability for the first time.

Fintech 4.0: Stablecoins and Permissionless Finance

Although the first three eras of fintech saw numerous innovations, their underlying mechanisms have changed little. Whether products are delivered through banks, neobanks, or embedded APIs, the flow of funds still follows a closed, permissioned path 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 the software layer.

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 completely eliminate the need to rent access. Developers no longer need to call bank APIs but can write code directly to open networks; settlements occur directly on-chain; fees belong to the protocol rather than intermediaries. We believe that building costs will be significantly reduced: from millions of dollars required to build through banks, or hundreds of thousands through BaaS, to just thousands of dollars using permissionless smart contracts on-chain.

This shift has already manifested at scale. The market capitalization of stablecoins has grown from nearly zero to about $300 billion in less than a decade, and their actual economic transaction volume now even exceeds that of traditional payment networks like PayPal and Visa, even without accounting for internal exchange transfers and MEV transactions. Non-bank, non-card payment channels have achieved true global scale for the first time.

Source: Artemis

To understand why this shift is so significant in practice, we need to look at how today's fintech companies are built. A typical fintech company relies on a multitude of vendors:

• 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/credit 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 with dozens of counterparties, with each layer adding costs and delays, and many teams spend as much time coordinating infrastructure as they do on product development.

The native systems of stablecoins simplify this complexity, merging functions that previously required six vendors into a single set of on-chain primitives.

In the 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 credit infrastructure will be thoroughly reformed and moved on-chain; once all assets are tokenized, capital market companies will become irrelevant; data aggregation will be replaced 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 layer (for example, if Alice's wallet is on the sanctions list, she will not be able to interact with the protocol).

This is the true difference of Fintech 4.0: the underlying architecture of finance has finally changed. People no longer need to develop another application that secretly requests bank authorization in the background; instead, they can directly replace most banking operations 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 significantly. 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 is no need to interface with card issuers, wait for days for settlement windows, or undergo cumbersome KYC checks, which will no longer be stumbling blocks to your development.

We believe that the fixed costs of launching finance-centric fintech products will plummet from millions of dollars to thousands of dollars. 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 models.

There is a clear historical parallel here. The previous generation of fintech companies initially served specific customer segments: SoFi provided student loan refinancing, Chime offered early wage access, Greenlight provided debit card services for teens, and Brex served entrepreneurs who could not access traditional business credit. However, this specialization ultimately failed to become a sustainable operating model, as transaction fees limited revenue and compliance costs rose. Dependence on sponsoring banks forced companies to expand their business scope beyond their initial niche markets. To survive, teams were compelled to horizontally expand, and the products ultimately launched were not driven by user demand but by the need for infrastructure to scale to maintain operations.

With cryptocurrency infrastructure and permissionless financial APIs significantly lowering startup costs, a new generation of stablecoin neobanks will emerge, targeting specific user groups like early fintech innovators. With significantly reduced operating costs, these new banks can focus on more segmented, specialized markets while maintaining their expertise: for example, Sharia-compliant financial services, lifestyles of cryptocurrency enthusiasts, or athletes with unique income and spending patterns.

The second-order effects are even more pronounced: specialization can enhance unit economics. Customer acquisition costs (CAC) decrease, cross-selling becomes easier, and the lifetime value (LTV) of individual customers increases. Specialized fintech companies can precisely match products and marketing with high-conversion target groups and gain more word-of-mouth referrals by serving specific populations. 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 matter of weeks, the question shifts from "Who can reach customers?" to "Who truly understands them?"

Exploring the Design Space of Specialized Fintech

The most attractive opportunities often emerge where traditional systems collapse or disintegrate.

Take adult content creators and performers as an example. They generate billions of dollars in revenue each year but are often shut out 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 often require paying 10% to 20% in fees through high-risk payment gateways like Epoch and CCBill. We believe that stablecoin-based payment methods can provide instant, irreversible settlements with programmable compliance, allowing performers to independently manage their income, automatically allocate funds 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 over a short career and often needs to be shared with agents, coaches, and staff. They must pay taxes in multiple states and countries, and injuries can completely disrupt their income. A stablecoin-based fintech product could help them tokenize future earnings, use multi-signature wallets to pay staff, and automatically withhold taxes by jurisdiction.

Luxury goods and watch dealers represent another market case where traditional financial infrastructure is underserved. These businesses often transport high-value inventory across borders, with transaction amounts frequently reaching six figures, and typically conduct transactions 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 deposited in bank accounts, making short-term financing both expensive and hard to obtain. We believe that stablecoin-based fintech can directly address these challenges: enabling instant settlements for large transactions, providing credit lines secured by tokenized inventory, and offering programmable escrow features built into smart contracts.

After studying enough cases, you will find the same limitations repeatedly arise: the banking operating model is not suited to serve users with global, uneven, or unconventional cash flows. However, these groups can develop into profitable markets using stablecoin platforms. We believe that some theoretically specialized stablecoin fintech company cases are quite attractive, such as:

• 1. Professional athletes: income concentrated over a short period; frequent travel and relocation; may need to file taxes in multiple jurisdictions; payroll includes coaches, agents, trainers, etc.; may want to hedge against injury risk.
• 2. Adult performers and creators: shut out by banks and credit card processors; audiences spread across the globe.
• 3. Employees of unicorn companies: cash "shortages," net worth concentrated in illiquid stocks; exercising options may incur high taxes.
• 4. On-chain developers: net worth concentrated in highly volatile tokens; facing exit and tax challenges.
• 5. Digital nomads: using banks for automatic currency exchange without a passport; automatic tax processing based on location; frequent travel/moving.
• 6. Prisoners: family/friends find it difficult to provide necessary support within the prison system, and costs are high; funds are often inaccessible through traditional channels.
• 7. Sharia-compliant: avoiding interest.
• 8. Generation Z: light credit banking services; gamified investing; social features.
• 9. Cross-border SMEs: high foreign exchange costs; slow settlements; working capital frozen.
• 10. Gamblers: using credit cards to pay for bets to spin the roulette.
• 11. Foreign aid: slow, opaque flow of aid funds requiring intermediaries; significant funds lost due to fees, corruption, and mismatches.
• 12. Tandas/rotating savings clubs: inherently cross-border, suitable for global families; pooled savings can earn returns; potential to build income records on the credit chain for credit access.
• 13. Luxury goods dealers (e.g., watch dealers): working capital tied up in inventory; need for short-term loans; conducting many high-value cross-border transactions; often transact via chat applications like WhatsApp and Telegram.

Conclusion

For most of the past two decades, fintech innovation has primarily focused on distribution channels rather than infrastructure building. Companies have competed in brand building, user registration, and paid customer acquisition, but the flow of funds itself still follows 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, credit, 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 organizations, and large vendor systems can now be built directly on-chain, greatly reducing overhead.

When infrastructure costs decrease, specialization becomes possible. Fintech companies no longer need millions of users to be profitable. Instead, they can focus on those segments and communities whose needs are difficult 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 naturally rather than relying on paid marketing.

Equally important, these communities often have similar cash flow situations, risk tolerances, and financial decision-making processes. This consistency allows product design to revolve around people's actual income, spending, and financial management practices rather than abstract demographic categories. Word-of-mouth marketing is effective not only because users know each other but also because the products genuinely fit the operational ways of the community.

If our vision becomes a reality, the economic transformation will be significant. As distribution channels integrate into communities, customer acquisition costs (CAC) decrease; as intermediaries are reduced, profit margins expand. Markets that were once too small or unprofitable will transform into sustainable, profitable enterprises.

In this world, the advantage of fintech will no longer lie in brute-force scaling and massive marketing expenditures but in a profound understanding of real-world contexts. The next generation of fintech companies will not win by serving everyone but by building infrastructure based on the actual flow of funds to provide exceptional services to specific groups, thereby capturing the market.

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