Fintech Investment Surges 2021, Stablecoins to Revolutionize Global Payments

In 2021, the fintech sector experienced a significant investment boom, with startups raising approximately $229 billion globally. Despite higher interest rates and tighter economic conditions, the sector continues to attract substantial investment. The global fintech sector is expected to see a rebound in investment activity throughout 2025. Investors are betting big on this sector because the current international finance system is in urgent need of modernization. Built for a pre-internet age, it relies on outdated processes, chains of intermediaries, and a patchwork of non-standard regulations.

One of the most glaring examples of this outdated system is SWIFT, founded in 1973, which remains the backbone of cross-border payments. SWIFT is essentially a messaging system that enables banks to communicate around transactions, but it was never designed to manage funds or process transactions. This has led to a "make do and mend" approach characterized by a proliferation of intermediaries and local payment rails. This antiquated, fragmented system creates significant friction in cross-border transactions, leading to delays, high costs, and limited choice for individuals and businesses outside major economic blocs. Fees for international payments currently average 1.5% for businesses and up to 6.3% for remittances. Payments can take up to several days to reach recipients.

This system hinders global commerce and exacerbates financial exclusion, particularly in the global south, where volatile local currencies and limited access to traditional banking services are common. Many of these friction points could be resolved by stablecoins, making transferring money across borders as easy as sending an email. Stablecoins, which are blockchain-based currencies, have the potential to revolutionize global finance.

For people in countries with volatile economies or unstable governments, stablecoins offer a safe haven for savings. Stablecoins pegged 1:1 to a fiat currency such as the US dollar provide consumers with a way to escape their national financial system with a trustworthy and transparent alternative that protects them from inflation and currency devaluation. This is particularly important in developing regions, where economic instability can erode the value of hard-earned income and savings.

Stablecoins can significantly reduce the costs and complexities associated with international payments, enabling small businesses and freelancers to participate in the global marketplace on a more level playing field. This opens up new opportunities for entrepreneurship and economic growth in developing countries. In the current payment system, physical money does not cross borders—only information does. A payroll company looking to pay a freelancer in a third country cannot do so directly and must use systems like Stripe, which uses virtual bank accounts to get around the problem.

With stablecoins, payroll companies can pay in any currency to any currency, using crypto on- and off-ramps to facilitate the payment. The business pays in dollars, for example, which is on-ramped to Tether’s USDt (USDT) and sent to the freelancer’s digital wallet, where they can either keep it or off-ramp it to their local currency. Stablecoins will prove to be a vital tool in helping businesses access global talent and fill their skills gaps.

Through offering an alternative to traditional banking systems, stablecoins also provide financial services to the unbanked and underbanked populations. This can be particularly transformative in regions with limited access to traditional financial infrastructure or in countries where there is low confidence in the national monetary system. Stablecoins can enable a wide range of payments and provide a gateway to other financial services, replicating the role of transaction accounts as a stepping stone to broader financial inclusion.

Given their ability to provide access to financial services anywhere with an internet connection, stablecoins are seeing explosive growth in emerging markets. Use cases are expanding rapidly across Africa, Latin America, and parts of developing Asia, where they are being used to hedge against inflation, for remittances and cross-border payments, and as a simpler alternative to US dollar banking. This growth trajectory can be expected to continue in the years ahead.

Stablecoins are rapidly rising in popularity and already total more than $233 billion in market capitalization, while transaction volumes in 2024 reached $15.6 trillion, surpassing those of Visa. In an increasingly uncertain world, they offer a stable, low-cost, and rapid means of transferring money across borders, helping to increase financial inclusion and smooth access to global talent for employers. Stablecoins are a digital-first financial tool for a digital-first world and are ideally suited to replacing the current archaic international payments system.