Stablecoins Are Reshaping Payments — and Killing Fees

Every time you buy a $2 cup of coffee, about $0.30 vanishes into a chain of intermediaries — payment gateways, processors, card networks, issuing banks, acquiring banks — before $1.70 reaches the person who actually made it. That toll has been an unavoidable cost of modern commerce since the 1950s, when the first charge cards introduced a system of trust-through-middlemen that has survived every technological wave since: plastic, magnetic stripes, chips, NFC, mobile wallets. The interfaces changed. The economics didn't.

In 2023, U.S. merchants paid approximately $224 billion in credit and debit card swipe fees. Amazon alone likely spends between $6–10 billion annually on interchange — money that doesn't improve the product, speed up delivery, or reduce prices. It simply evaporates into the plumbing.

A stablecoin transaction on a modern blockchain accomplishes the same movement of value for under $0.01 and settles instantly. Not "authorized instantly, settled in two business days." Actually settled. That gap — from 2–3% down to fractions of a cent — represents one of the largest margin-recapture opportunities in the global economy.

And unlike previous fintech revolutions that merely reskinned the same rails, this one replaces them.

The Scale of What's at Stake

The global payments industry is staggering in scope. In 2023, it handled 3.4 trillion transactions representing $1.8 quadrillion in value and generating $2.4 trillion in revenue (Source: McKinsey: The 2024 Global Payments Report). The United States alone processed $5.6 trillion in credit card payments and $4.4 trillion via debit. These are not small numbers being skimmed. This is the circulatory system of the global economy, and every transaction carries a tax.

International payments are even worse. Sending money through traditional networks like SWIFT means contending with flat outbound fees of $25–50, hidden FX markups of 2–3% above mid-market rates, additional deductions from intermediary correspondent banks, and settlement times measured in days. Senders routinely face uncertain final delivery amounts, cash flow delays, and the administrative purgatory of tracing lost funds across borders.

These frictions are not bugs. They are features of a system designed around institutional trust and intermediation. Every hop in the chain exists because the previous architecture required a trusted party to verify, reconcile, and guarantee the transfer.

Stablecoins eliminate the need for most of those hops.

What's a Stablecoin?

A stablecoin is a digital token on a blockchain designed to maintain a 1:1 peg with a reference asset — most commonly the U.S. dollar. Unlike Bitcoin or Ethereum, which are volatile speculative assets, stablecoins act as programmable digital cash. They combine the high-speed, 24/7, borderless nature of blockchain with the price predictability of fiat currency.

The two dominant stablecoins — Tether's USDT and Circle's USDC — have a combined market capitalization exceeding $260 billion, with trading volume reaching $23 trillion in 2024 alone. Stablecoin supply has grown more than tenfold since 2020. In June 2025, the GENIUS Act was signed into U.S. law, establishing the first federal regulatory framework for payment stablecoins, requiring issuers to maintain 1:1 reserves in highly liquid assets like short-dated Treasuries. What was once a gray-area experiment now has a legal foundation.

A Structural Shift, Not an Incremental Improvement

This isn't a minor optimization. It's a total re-architecture of money:

The fundamental shift is from a pull-based system of shared secrets (your 16-digit card number, passed through five intermediaries) to a push-based system of cryptographic proof. That single architectural change collapses the intermediary stack, eliminates settlement delay, and destroys the fee model that extracts $224 billion a year from American merchants alone.

The Evidence Is No Longer Theoretical

McKinsey and Artemis Analytics estimate that actual stablecoin payment volume (filtering out trading activity) hit $390 billion annually as of late 2025 — more than doubling from 2024. B2B payments dominate at roughly 60% of that volume, with a 733% year-over-year increase. Stablecoin-linked card spending grew 673% to $4.5 billion in 2025.

Visa's on-chain stablecoin settlement for card issuers reached a $3.5 billion annual run-rate by late 2025. PayPal's Pay with Crypto converts wallet balances into merchant payouts, targeting cross-border fee reduction. Stripe acquired stablecoin infrastructure company Bridge for $1.1 billion. Circle unveiled a new blockchain (Arc) with sub-second finality and transaction fees paid in USDC.

The interface stays familiar: tap, pay, done. But behind the curtain, stablecoins are already replacing legacy settlement. And this is just the opening act. The technology enables something far more fundamental — full self-custody and peer-to-peer value transfer without a single intermediary in between.

A Different Model Entirely

For a century, the banking business model has been a simple, lucrative extraction: they borrow your capital for nothing, lend it for 7%, and pocket the spread. We’ve called this "liquidity," but it's really just a tax on idle value.

Self-custody flips the script. By holding your own private keys, you aren't just "storing" money; you are running your own sovereign node. In this model, authorization is settlement. We move from a world of "trust-through-intermediaries" to one of "cryptographic proof." The result is a total re-architecture of the treasury: instead of subsidizing a bank’s lending margin, idle capital can be programmatically routed into on-chain yield. No 3-day purgatory for wires, no gatekeepers, and no "closed on weekends." It’s the final unbundling of the bank.

What's Holding It Back

Regulatory complexity is real, even post-GENIUS Act. The law establishes a framework, but implementation is pending. Federal regulators (OCC, Fed, FDIC, NCUA) have until December 2026 to issue final rules. States must demonstrate "substantially similar" oversight to approve their own issuers. The interest-bearing stablecoin debate remains politically charged, with bank lobbies pushing to restrict yield features that could compete with deposits.

Merchant adoption remains indirect. Direct stablecoin acceptance at point-of-sale is still rare. Compliance burdens (AML/KYC), the absence of chargeback mechanisms consumers rely on, and immature merchant tooling all create friction. The practical path forward — and the one Visa and Stripe are betting on — is stablecoin settlement behind the existing card interface, not in place of it.

De-peg risk and reserve transparency are systemic concerns. Tether's reserve composition has faced persistent scrutiny. The GENIUS Act addresses this by requiring 1:1 backing with highly liquid U.S. government securities, but enforcement mechanisms are still being built. The interdependence between stablecoin reserves and the Treasury market is growing in both directions — a development that regulators are watching closely.

Consumer protection gaps exist. Blockchain transactions are immutable. There's no "call your bank" recourse for erroneous transfers. Dispute resolution must be rebuilt at the application layer, and those systems are nascent.

Alternatives. For consumers, credit cards charge no transaction fees, offer 1–3% cash back, include fraud insurance, and provide chargeback rights — the 3% interchange cost is borne entirely by merchants, giving consumers no incentive to switch. For domestic transactions, FedNow already delivers instant, 24/7 settlement at a fraction of a cent with no blockchain required.

What Comes Next

As someone who runs technology for a bank, I understand the mechanics on both sides of this equation — the legacy infrastructure that still works, and the emerging rails that threaten to make parts of it obsolete. Interchange revenue, float income, wire fees — these are real economics that fund real operations across the industry. But intellectual honesty demands acknowledging that the most profitable layer of the payments stack is also the most vulnerable.

The transition won't be a sudden flip. It will be a layered migration — stablecoins quietly replacing settlement plumbing underneath interfaces that still look and feel like the card swipes and checkout screens consumers already trust. But as payment costs compress toward zero, the business models sitting on top will have to evolve. Incumbents will scramble to monetize in new ways: taking a cut of stablecoin reserve yield, selling fraud detection and compliance tooling as standalone services, unbundling the credit-rewards-protection bundle that has been quietly subsidized by interchange for decades.

The deeper disruption, though, won't come from incumbents adapting. It will come from startups that couldn't be possible with the old rails at all. When every transaction is free, instant, and borderless by default, entirely new categories of commerce become viable — micropayment-funded content, machine-to-machine settlement, real-time revenue splitting across global supply chains, payroll that streams by the minute instead of arriving biweekly.

The $224 billion question isn't whether stablecoins will reshape payments. It's whether the institutions currently collecting those fees will be the ones building the next architecture — or the ones being routed around.

Appendix: Payment Rail Comparison