Financial technology has changed the way financial products are accessed over the past 20 years but has not fundamentally altered the flow of capital. Stablecoins are breaking this pattern by enabling open, permissionless networks, allowing fintech companies to shift from “leasing bank APIs” to “owning financial infrastructure,” significantly reducing costs and enabling specialized services. This article is adapted from an essay by Spencer Applebaum, organized, translated, and written by Techflow.
(Background: South Korea delays “Korean Won stablecoin” launch, missing Asia’s first mover advantage; banks and Financial Services Commission dispute)
(Additional context: PBOC Governor Pan Gongsheng: Insist on cracking down on cryptocurrencies! Stablecoins are still in early development, with digital RMB being promoted)

Table of Contents

• Fintech 1.0: Digital Distribution (2000-2010)
• Fintech 2.0: The New Banking Era (2010-2020)
• Fintech 3.0: Embedded Finance (2020-2024)
• The Commodification of Fintech
• Fintech 4.0: Stablecoins and Permissionless Finance
• Opportunities for Fintech Focused on Stablecoins
  • Exploring the Design Space of Focused Fintech
• Summary

Over the past two decades, fintech (fintech) has transformed how people access financial products but has not truly changed the way capital flows.

Innovation has mainly focused on simpler interfaces, smoother user experiences, and more efficient distribution channels, while core financial infrastructure has remained largely unchanged. During most of this period, the technology stack of fintech was more about resale than rebuilding from scratch.

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

###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 packaged existing financial products by combining traditional systems (such as ACH, SWIFT, and card networks established decades ago) with web interfaces.

In this phase, fund settlement was slow, compliance processes relied on manual work, and payment processing was constrained by strict schedules. While bringing financial services online, it did not fundamentally change the flow of capital. The only change was who could access these products, not how they operated.

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

The next breakthrough came with the proliferation of smartphones and social distribution. Chime offered early wage access for hourly workers; SoFi focused on student loan refinancing for high-potential graduates; Revolut and Nubank used user-friendly interfaces to serve low-income populations globally.

Although each company told a more appealing story to specific audiences, they essentially sold the same products: checking accounts and debit cards running on legacy payment networks. They still depended on sponsor banks, card networks, and ACH systems, no different from their predecessors.

Their success was not because they built new payment networks but because they better reached customers. Brand, user onboarding, and customer acquisition became their competitive advantages. At this stage, fintech companies became distribution-savvy entities dependent on banks.

###Fintech 3.0: Embedded Finance (2020-2024)

Starting around 2020, embedded finance rapidly emerged. API (Application Programming Interface) adoption enabled nearly any software company to offer financial products. Marqeta allowed companies to issue cards via API; Synapse, Unit, and Treasury Prime provided Banking-as-a-Service (BaaS). Soon, almost every app could offer payments, cards, or loans.

However, behind these abstraction layers, no fundamental change occurred. BaaS providers still relied on early-era sponsor banks, compliance frameworks, and payment networks. The abstraction shifted from banks to APIs, but economic benefits and control remained with traditional systems.

###The Commodification of Fintech

By the early 2020s, the flaws of this model became apparent. Almost all major new banks depended on a small set of sponsor banks and BaaS providers.

Source: Embedded

Due to fierce competition through performance marketing, customer acquisition costs soared, profit margins shrank, fraud and compliance costs surged, and infrastructure became nearly indistinguishable. Competition turned into a marketing arms race. Many fintechs tried to differentiate via card colors, sign-up bonuses, and cashback offers.

Meanwhile, control over risk and value remained with banks. Large institutions like JPMorgan Chase (JPMorgan Chase) and Bank of America (Bank of America), regulated by the OCC (Office of the Comptroller of the Currency), retained core privileges: accepting deposits, issuing loans, and accessing federal payment networks like ACH and Fedwire (. Fintechs like Chime, Revolut, and Affirm lacked these privileges and depended on licensed banks for these services. Banks profit from interest spreads and platform fees; fintechs rely on interchange fees )interchange(.

As fintech projects proliferated, regulators scrutinized the sponsor banks more strictly. Regulatory orders and increased oversight forced banks to invest heavily in compliance, risk management, and third-party supervision. For example, Cross River Bank faced compliance orders from the FDIC )Federal Deposit Insurance Corporation(; Green Dot Bank was subject to enforcement actions by the Federal Reserve ); and Evolve Bank received a cease-and-desist order from the Fed.

Banks responded by tightening onboarding processes, limiting supported projects, and slowing product iteration. Once an environment of innovation, now only larger scale could justify compliance costs. Growth in fintech became slower, more expensive, and focused on mass-market products rather than niche solutions.

From our perspective, three main reasons explain why innovation has been confined to the top layers of the tech stack over the past 20 years:

1. Capital infrastructure is monopolized and closed: Visa, Mastercard, and the Fed’s ACH network leave little room for competition.

2. Startups need massive capital to launch core financial products: developing a regulated banking app costs millions for compliance, fraud prevention, and fund management.

3. Regulations restrict direct participation: only licensed entities can custody funds or move money through core payment networks.

Source: Statista

Given these constraints, it’s more prudent to focus on building products rather than challenging existing payment networks directly. As a result, most fintech end up as sleek wrappers around bank APIs. Despite many innovations over two decades, truly new financial primitives (financial primitives) have rarely emerged. Historically, there have been almost no viable alternatives.

In contrast, the crypto industry has taken a different path. Developers initially focused on building financial primitives—from AMMs (Automated Market Makers), bonding curves (bonding curves), perpetual contracts (perpetual contracts), liquidity vaults (liquidity vaults), to on-chain lending—all starting from foundational architecture. For the first time in history, financial logic itself became programmable.

(Fintech 4.0: Stablecoins and Permissionless Finance

While the first three eras of fintech achieved many innovations, the underlying capital flow architecture remained largely unchanged. Whether financial products are provided via traditional banks, new banks, or embedded APIs, capital still flows through closed, permissioned networks controlled by intermediaries.

Stablecoins are transforming this pattern. They no longer build on top of banks but directly replace core banking functions. Developers can interact directly with open, programmable networks. Payments settle on-chain; custody, lending, and compliance shift from traditional contracts to software.

BaaS, while reducing friction, does not alter the economic model. Fintech companies still pay compliance fees to sponsor banks, settlement fees to card networks, and access fees to intermediaries. Infrastructure remains costly and limited.

Stablecoins eliminate the need for leasing access altogether. Developers no longer call bank APIs but interact directly with open networks. Settlement occurs on-chain; fees flow to protocols, not intermediaries. We believe this shift greatly lowers the cost barrier—from hundreds of thousands or millions of dollars to develop with banks or BaaS, to just a few thousand dollars using permissionless on-chain smart contracts.

This transformation is already evident in large-scale applications. The market cap of stablecoins grew from near zero to about $300 billion within less than a decade. Even excluding transfers between trading platforms and maximum extractable value )MEV###, the actual economic transaction volume surpasses traditional payment networks like PayPal and Visa. For the first time, non-bank, non-card payment networks can operate at a truly global scale.

Source: Artemis

To understand the significance of this shift, we need to examine how current fintech is built. Typical fintech relies on a vast vendor tech stack, including:

• UI/UX
• Banking and custody layers: Evolve, Cross River, Synapse, Treasury Prime
• Payment networks: ACH, Wire, SWIFT, Visa, Mastercard
• Identity and compliance: Ally, Persona, Sardine
• Fraud prevention: SentiLink, Socure, Feedzai
• Underwriting / credit infrastructure: Plaid, Argyle, Pinwheel
• Risk and funds management: Alloy, Unit21
• Capital markets: Prime Trust, DriveWealth
• Data aggregation: Plaid, MX
• Compliance / reporting: FinCEN, OFAC checks

Launching a fintech on this stack means managing contracts, audits, incentive mechanisms, and failure modes across dozens of partners. Each layer adds cost and delay, with teams spending most of their time coordinating infrastructure rather than developing products.

In contrast, a stablecoin-based system greatly simplifies this complexity. Functions that previously required multiple vendors can now be implemented with a handful of on-chain primitives (on-chain primitives).

In a world centered on stablecoins and permissionless finance, the following changes are happening:

• Banking and custody: Replaced by decentralized solutions like Altitude.
• Payment networks: Replaced by stablecoins.
• Identity and compliance: Still needed but can be implemented on-chain with privacy-preserving tech like zkMe.
• Underwriting and credit infrastructure: Fully reimagined and moved on-chain.
• Capital markets: When all assets are tokenized, these become irrelevant.
• Data aggregation: Replaced by on-chain data and selective transparency (e.g., via 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 cannot interact with the protocol).

The real difference in fintech 4.0 is that the foundational architecture of finance is finally beginning to change. Instead of developing applications that silently seek permission from banks in the background, now stablecoins and open payment networks replace core banking functions directly. Developers are no longer tenants but true owners of the “land.”

(Opportunities for Focused Fintech on Stablecoins

The most compelling opportunities often arise where traditional payment networks fail.

For example, adult content creators and performers generate billions annually but are often “blocked” by banks and card processors due to reputation or refund risks. Their payments can be delayed by days or withheld due to “compliance reviews,” and they often pay high-risk payment gateways )like Epoch, CCBill( 10-20% fees. Stablecoin-based payments can offer instant, irreversible settlement, programmable compliance, self-custody of income, automatic tax or savings allocations, and global acceptance without relying on high-risk intermediaries.

Similarly, professional athletes—especially in golf and tennis—face unique cash flow and risk dynamics. Their income is concentrated in short careers, often requiring payments to agents, coaches, and team members. They must pay taxes across multiple jurisdictions, and injuries can halt income entirely. A stablecoin fintech can tokenize future earnings, pay team wages via multi-signature wallets, and automatically deduct taxes based on regional requirements.

Luxury goods and watch dealers are another underserved market. These businesses often transfer high-value inventory across borders via wire transfers or high-risk processors, with settlement taking days. Their liquidity is locked in inventory, not bank accounts, making short-term financing expensive and hard to access. A stablecoin fintech can directly address these issues: instant settlement for large transactions, tokenized inventory-backed credit lines, and programmable escrow services with smart contracts.

Examining these cases reveals recurring limitations: traditional banks do not serve users with global, irregular, or non-traditional cash flows. But these groups can become profitable markets via stablecoin payment networks. Here are some promising focused stablecoin fintech examples:

• Professional athletes: Short careers, frequent travel, multi-jurisdictional taxes, payroll needs, injury hedging.
• Adult performers and creators: Excluded from banks and card processors; global audiences.
• Unicorn employees: Cash-strapped, with wealth in illiquid equity; facing high taxes on options.
• On-chain developers: Wealth in volatile tokens; issues with fiat withdrawals and taxes.
• Digital nomads: No-passport banking, automatic FX, regional tax automation, frequent travel.
• Prisoners: Difficult and costly to receive deposits via traditional channels; funds often delayed.
• Sharia-compliant finance: Avoiding interest-based transactions.
• Gen Z: Light credit banking, gamified investing, social finance.
• Cross-border SMEs: High FX costs, slow settlement, frozen working capital.
• Crypto enthusiasts )Degens(: Using credit card bills for high-risk speculative trades.
• International aid: Slow, intermediary-dependent, opaque aid flows; high fees, corruption, misallocation.
• Tandas / Rotating savings clubs: Cross-border savings for global families; pooled savings for yield; on-chain income history for credit scoring.
• Luxury dealers )e.g., watch dealers###: Liquidity locked in inventory; need short-term loans; high-value cross-border trades; frequent chat-based transactions via WhatsApp, Telegram.

(Summary

Over the past 20 years, fintech innovation has mainly focused on distribution rather than infrastructure. Companies compete in branding, user onboarding, and paid customer acquisition, but capital still flows through the same closed payment networks. While expanding financial access, this has led to homogenization, rising costs, and razor-thin margins.

Stablecoins are poised to fundamentally change the economic model of financial products. By transforming custody, settlement, lending, and compliance into open, programmable software, they drastically reduce startup and operational costs. Functions that previously depended on sponsor banks, card networks, and large vendor stacks can now be built directly on-chain, with significantly lower operating expenses.

As infrastructure becomes cheaper, specialization becomes feasible. Fintech companies no longer need millions of users to be profitable. Instead, they can focus on niche, well-defined communities that traditional one-size-fits-all products cannot serve well—such as athletes, adult creators, K-pop fans, or luxury watch dealers—groups with shared culture, trust, and behaviors, enabling organic growth through word-of-mouth rather than paid marketing.

Equally important, these communities often share similar cash flow patterns, risks, and financial behaviors. This consistency allows product design to be tailored to actual income, expenses, and capital management, rather than abstract user personas. Word-of-mouth is strengthened by genuine operational fit, not just social familiarity.

If this vision becomes reality, this economic shift will be profound. As distribution aligns more closely with communities, customer acquisition costs )CAC( will decline; profit margins will improve with fewer intermediaries. Markets once deemed too small or unprofitable will become sustainable and lucrative.

In such a world, fintech’s advantage shifts from simple scale and marketing spend to deep understanding of user backgrounds. The next generation of fintech will succeed not by trying to serve everyone but by providing exceptional services tailored to specific groups based on actual capital flows.