Fintechs Undercut Banks on Cross-Border Payments as Stablecoins Face Cost Hurdles

Fintech money transfer providers have substantially reduced the cost of cross-border payments compared with traditional bank wires, while stablecoins remain constrained by conversion fees, liquidity and the continued need for intermediaries, according to new research comparing competing payment rails.

Fintechs Undercut Banks on Payment Costs

The new working paper by the Bank for International Settlements, examines traditional correspondent banking, fintech money transfer operators such as Wise and Remitly, and stablecoin-based transfers.

Its central finding is that the architecture used to move money matters considerably. While wholesale foreign exchange markets for major currencies operate with very tight spreads, retail customers can still face sizeable mark-ups when sending money through banks.

Bank FX Mark-Ups Remain High

In the researchers’ limited sample of international bank wires, FX mark-ups for highly liquid currencies ranged from approximately 2.3% to 4.7%, before separate wire charges were included.

That means the figures represent a lower bound on the actual cost paid by customers.

Fintech operators performed significantly better. For transfers above $10,000 from the US into developed markets, median costs were typically around 0.4% to 0.6%, although the price increased considerably for some emerging and less liquid currencies.

The researchers attribute this advantage to internal netting of customer flows, pre-funded local liquidity, digitised compliance and more transparent pricing.

Stablecoins Do Not Eliminate Intermediaries

Stablecoins present a more complicated picture.

An international payment commonly requires what the paper calls a “stablecoin sandwich”: fiat currency is converted into a dollar stablecoin, transferred over a blockchain, and then converted back into the recipient’s local currency.

The blockchain component itself can be extremely cheap. Gas fees on many networks are measured in cents and are economically negligible for larger transfers.

The costs instead emerge around the blockchain.

Crypto exchanges may charge trading fees, while fiat withdrawals and other on- and off-ramp services create additional expense. The researchers argue that exchanges effectively replace some of the functions traditionally performed by correspondent banks rather than eliminating intermediation altogether.

Liquidity Remains the Critical Constraint

Stablecoins can deliver attractive exchange rates in some emerging markets, particularly where capital controls create strong demand for dollar exposure.

But the paper cautions that this advantage may reflect market distortions rather than technological efficiency.

Liquidity is another significant obstacle. Stablecoin-to-fiat and stablecoin-to-stablecoin markets remain tiny compared with conventional FX markets, increasing the potential for volatile pricing and slippage on larger transactions.

The paper also stresses that comparisons remain imperfect because costs, corridors and transaction sizes are not always directly aligned across each payment method.

The wider conclusion is therefore less about one technology replacing another.

Fintechs have already demonstrated that cross-border payments can become materially cheaper without replacing conventional money. Stablecoins may eventually exert similar competitive pressure, but their success will depend as much on liquidity, fiat access, regulation and trusted intermediaries as on the speed of blockchain settlement itself.