The global payments industry processed an astounding $1.8 quadrillion in value across 3.4 trillion transactions during 2024, highlighting the massive scale of real-time payments in our modern economy.
However, traditional cross-border payments continue to face significant challenges – high fees, processing delays, and lack of transparency plague the current system.
While banks have long dominated the payments landscape, stablecoin payments are rapidly gaining ground.
In fact, stablecoin transfer volumes reached $27.6 trillion in 2024, surpassing the combined transaction volumes of Visa and Mastercard by 7.7%.
The cost difference is equally striking – sending $200 from the U.S. to Colombia using stablecoins costs less than $0.01, compared to $12.13 through traditional payment rails.
In this article, we’ll explore why banks are increasingly turning to stablecoin-based solutions for cross-border payments, examining the competitive pressures, technological advantages, and strategic benefits driving this quiet revolution in banking infrastructure.
The Competitive Pressure Driving Banks Toward Stablecoin Adoption
Banks worldwide face unprecedented pressure to modernize their cross-border payment systems. With traditional finance increasingly challenged by nimble competitors, stablecoins have emerged as a strategic answer to mounting market demands.
Fintech Disruption in the $2.4 Trillion Payment Industry
The global payments sector generates a staggering $2.4 trillion in annual revenue, representing a dramatic expansion from $805 billion in 2010.
This explosive growth has attracted numerous fintech disruptors seeking to capture market share from established banks. Non-bank players including PayPal, Stripe, and Square are aggressively challenging traditional financial institutions, forcing banks to reconsider their decades-old infrastructure.
Moreover, traditional banking systems suffer from significant inefficiencies. Banks currently lock up approximately $10 trillion in Nostro/Vostro accounts solely to facilitate cross-border transactions through correspondent banking networks.
This capital remains essentially idle, earning minimal returns while creating substantial opportunity costs.
According to industry research, even a modest 5% shift toward stablecoin solutions would free up $500 billion in liquidity, which could instead be deployed for innovation, lending, or other revenue-generating activities.
Customer Demand for Instant Cross-Border Transfers
Consumer expectations have fundamentally shifted toward immediacy.
Approximately 63% of global consumers have already used instant payment systems to send funds across borders, indicating substantial market adoption.
Furthermore, studies reveal that four out of five Americans express interest in faster payment options.
The contrast between customer expectations and traditional banking capabilities creates significant friction.
Traditional cross-border transactions can take several days to clear, whereas stablecoin transactions process almost instantly regardless of geographical boundaries. This performance gap has become increasingly unacceptable to customers accustomed to instant digital experiences in other aspects of their lives.
Banking clients are showing increasing willingness to move their business away from traditional financial institutions specifically to gain access to faster, more transparent, and cost-effective payment options.
For financial institutions, this represents both an existential threat and a strategic opportunity.
Cost Reduction Imperative: 80% Lower Transaction Fees
Beyond speed, transaction costs present another compelling case for stablecoin adoption. Traditional cross-border payments impose substantial fees:
- Consumer cross-border payments often incur bank fees averaging over 11%
- Business-to-business payments typically face fees averaging 1.5% with processing delays extending to several weeks
- Nearly half of Citibank’s corporate clients identify high costs as a primary pain point
Alternatively, research indicates that stablecoin transactions can reduce remittance fees by up to 80% compared to traditional methods.
For instance, using a mid-range fee of 3% for traditional systems versus approximately 1.8% with stablecoins represents a 1.2 percentage point reduction per transaction. At scale, this translates to potential savings of $23 billion annually.
Under optimistic adoption scenarios where 5% of cross-border volume shifts to stablecoin rails, the global payments ecosystem could realize savings approaching $116 billion yearly.
This cost advantage, coupled with the operational benefits of near-instant settlement, makes stablecoin adoption increasingly attractive for financial institutions under competitive pressure.
How Traditional Banking Infrastructure Limits Real-Time Payment Capabilities
Traditional financial institutions operate on technological foundations built decades ago—a reality that severely hampers their ability to deliver real-time payment capabilities in today’s digital economy.
Legacy Systems and Their Settlement Timeframes
Antiquated core systems remain the backbone of most banks’ payment infrastructure, with 75% of banks facing significant hurdles in deploying new digital payment technologies due to these outdated systems.
Predominantly built on legacy programming languages like COBOL, these aging platforms lack the flexibility needed for modern payment processing.
Consequently, banks allocate substantial resources toward maintaining what already exists rather than innovating.
In 2024, approximately 64% of corporate banks’ IT spending went toward maintaining existing systems rather than developing new technologies.
This maintenance-heavy approach leaves little room for modernization efforts.
Traditional banking operates on batch processing principles—fundamentally incompatible with true real-time payments.
Unlike instant payment systems that process transactions individually and continuously, conventional banks collect transactions and process them at predetermined intervals. Most notably, these batch-oriented systems:
- Operate only during “banking hours,” often excluding weekends and holidays
- Require cut-off times for daily transaction submissions
- Process payments through end-of-day settlement rather than immediate clearing
Despite appearing instant to customers through “memo posting,” many banks are merely creating the illusion of real-time processing.
As one industry expert noted, “Banks are kind of faking it in terms of this real-time aspect of things”. Behind the scenes, transactions still follow traditional settlement timeframes, with core systems updated through multiple batches over several days.
The High Cost of Correspondent Banking Networks
Cross-border payments face particularly severe limitations due to reliance on correspondent banking networks.
This model requires multiple intermediaries for international transactions, with each bank adding its own compliance checks, fees, and processing delays. The inherent complexity of this approach creates both operational inefficiencies and financial burdens.
The correspondent banking model has come under acute pressure, with customers, regulators, and competitors questioning its viability.
Traditional cross-border payments continue to be expensive, slow, and lacking transparency regarding both costs and delivery times. Furthermore, the process suffers from a “relatively high failure rate” compared to domestic transfers.
Besides operational challenges, maintaining correspondent banking relationships demands significant capital allocation.
Banks must lock up substantial funds in nostro/vostro accounts solely to facilitate cross-border transactions—money that sits idle while incurring opportunity costs.
Additionally, many global banks have pruned their correspondent networks post-financial crisis, terminating relationships deemed too risky or no longer cost-effective.
Overall, as banks evaluate stablecoin adoption for real-time payment capabilities, they must address these fundamental infrastructure limitations that have long constrained innovation in global payments.
Strategic Advantages of Stablecoin-Based Real-Time Payments Network
Stablecoin technology offers banks a powerful alternative to conventional payment infrastructure, with benefits extending far beyond simple cost reduction. These blockchain-based assets are emerging as strategic tools that address fundamental weaknesses in traditional banking models.
24/7 Settlement Without Intermediaries
Unlike traditional banking systems that operate only during business hours, stablecoin networks function continuously, enabling transactions to be processed anytime.
Whereas conventional cross-border transfers might take several days to clear, stablecoin transactions settle in seconds to minutes, regardless of geographical boundaries. This 24/7 availability allows financial institutions to process payments on weekends and holidays, eliminating the arbitrary constraints of banking hours.
Furthermore, stablecoins eliminate the need for intermediaries in the payment process. By leveraging blockchain technology, they enable direct transactions between parties, removing correspondent banking relationships that historically slowed down cross-border transfers.
This disintermediation creates a more streamlined, efficient payment ecosystem that significantly reduces settlement risk.
Reduced Operational Costs and Resource Requirements
The operational advantages of stablecoin-based payment networks are substantial. Transaction fees can be reduced by up to 80% compared to traditional methods. This dramatic cost reduction primarily stems from:
- Elimination of multiple intermediaries that each take a fee
- Lower infrastructure maintenance requirements
- Reduction in compliance and reconciliation expenses
Beyond direct fee savings, stablecoins enable banks to optimize their resource allocation. Traditional banks currently lock approximately $10 trillion in nostro/vostro accounts solely to facilitate cross-border payments.
Transitioning even a fraction of these operations to stablecoins could free up billions in capital, allowing banks to reinvest these funds in innovation or customer-facing initiatives.
Enhanced Liquidity Management
Stablecoin settlement provides banks with unprecedented liquidity advantages. Immediate settlement means funds become available instantly rather than being trapped in payment processing cycles for days.
This enhanced liquidity flow enables treasurers to manage cash positions more effectively and deploy capital more strategically.
Indeed, improved liquidity management through stablecoins could boost efficiency by up to 40% according to industry analysis.
Additionally, blockchain-based settlement provides complete transparency into transaction status, simplifying reconciliation processes that traditionally consume significant resources.
Competitive Positioning Against Payment Disruptors
Perhaps most importantly, stablecoin adoption positions banks to compete effectively against fintech challengers.
As payment processors like Block (formerly Square), Stripe, and Fiserv incorporate stablecoins to improve their margins, banks that adopt this technology can maintain relevance in an increasingly competitive landscape.
Stablecoin orchestration capabilities enable banks to handle payments at substantially lower costs without requiring extensive process changes.
By integrating these capabilities, financial institutions can offer the speed and cost advantages that customers increasingly demand, while maintaining the security and trust advantages they traditionally hold over newer market entrants.
Case Studies: Major Banks Implementing Stablecoin Payment Solutions
Leading global banks have moved beyond theoretical interest in stablecoins, launching actual implementations that demonstrate the practical value of blockchain-based payment solutions.
JPMorgan’s JPM Coin: First-Mover Advantage
JPMorgan Chase pioneered institutional stablecoin adoption with JPM Coin in February 2019, becoming the first major U.S. bank to create a cryptocurrency for institutional payments.
Initially focusing on 24/7 availability, JPM Coin subsequently evolved to include programmable functionality that substantially increased adoption. The bank reports that daily transaction volumes now reach approximately $1 billion, with some days seeing “high single-digit billions of dollars” in transfers.
Programmability has emerged as the key driver behind JPM Coin’s growth. According to bank executives, transaction volumes “exploded by factors of ten, if not hundreds” after introducing programmable features. This functionality enables:
- Automated payments triggered by specific events
- Pay-per-use business models (like industrial printers paid per print)
- Smart contract-based settlement workflows
Siemens stands out as JPM Coin’s “lighthouse client,” utilizing both dollar and euro versions with programmable features for industrial applications.
Standard Chartered’s Cross-Border Payment Initiative
Meanwhile, Standard Chartered has taken a collaborative approach to stablecoin development. The bank recently established a joint venture with Animoca Brands and Hong Kong Telecommunications (HKT) to issue a Hong Kong dollar-backed stablecoin.
This partnership strategically combines Standard Chartered’s banking infrastructure, Animoca’s blockchain expertise, and HKT’s mobile wallet technology.
The joint venture is participating in the Hong Kong Monetary Authority’s stablecoin issuer sandbox, launched in July 2024.
This initiative aims to explore stablecoin applications for enhancing both domestic and cross-border payments. Standard Chartered’s CEO for Hong Kong and Greater China emphasized their goal of becoming “one of the first issuers launching an HKD-backed stablecoin” under the new regulatory framework.
Regional Banks’ Collaborative Approaches
Beyond global giants, smaller regional banks are forming strategic partnerships to access stablecoin capabilities without building proprietary solutions. These institutions primarily collaborate with stablecoin infrastructure providers like Circle, Paxos, BVNK, and Bitso Business.
Such collaborations enable banks to unlock liquidity, reduce transaction costs, and accelerate operations—particularly for non-wholesale B2B cross-border payments.
Modern Treasury has likewise partnered with Brale to offer stablecoin payments through traditional banking interfaces, eliminating complexity while maintaining compliance safeguards.
These implementations represent a significant shift from theoretical interest to practical adoption, demonstrating how major financial institutions are quietly embracing stablecoin technology to enhance their real-time payment capabilities.
Regulatory Navigation: How Banks Are Managing Compliance Challenges
Navigating the complex regulatory landscape presents a significant challenge for banks implementing stablecoin-based real-time payments.
Currently, there exists no comprehensive national framework specifically designed for stablecoins in the United States, creating a fragmented environment that banks must carefully traverse.
Working Within Existing Regulatory Frameworks
Banks face an uncertain regulatory environment characterized by overlapping jurisdictions of multiple federal agencies.
The SEC views certain stablecoins as potentially qualifying as securities, while the CFTC considers them commodities subject to anti-fraud authority. Simultaneously, FinCEN regulates stablecoin issuers as money services businesses, and the OCC has issued guidance on bank involvement. This creates a patchwork of requirements rather than a cohesive framework.
Nevertheless, financial institutions are finding pathways forward. JPMorgan secured regulatory approval for JPM Coin by positioning it as a tokenized bank deposit rather than a cryptocurrency. In 2023, the OCC confirmed that crypto-asset custody and certain stablecoin activities are permissible for national banks, although institutions must demonstrate adequate risk controls.
Bank-Led Advocacy for Stablecoin Legislation
Financial institutions actively shape emerging regulations through industry associations. The American Bankers Association has emphasized that stablecoin legislation must “balance the potential for improving customer payment experience with the need to limit negative economic consequences”.
Similarly, the Independent Community Bankers of America advocates for consistent standards between banks and nonbanks to prevent regulatory arbitrage.
These efforts have influenced legislative proposals such as the STABLE Act and GENIUS Act, which would establish federal supervisory frameworks for stablecoins. The GENIUS Act has received bipartisan support, requiring issuers to back stablecoins with reserves on a 1:1 basis and comply with anti-money laundering laws.
Risk Management Protocols for Stablecoin Operations
Banks implement comprehensive risk management frameworks for stablecoin operations. These include reserve management practices ensuring stablecoins are fully backed by liquid assets, regular reserve disclosures with independent audits, and enhanced anti-money laundering protocols through smart contracts.
Additionally, banks must address operational resilience concerns, implementing cyber security safeguards and “fit and proper” requirements for individuals involved in management. These risk management protocols reflect the principle of “same risk, same regulatory outcome” endorsed by international standard-setters.
Future Banking Models Enabled by Stablecoin Technology
Stablecoins are catalyzing a fundamental shift in banking business models, moving beyond simple payment processing to enable entirely new financial services. This transformation has begun to reshape how financial institutions operate, generate revenue, and interact with customers.
Programmable Money and Smart Contracts in Banking Services
Programmable money represents the next evolution in financial transactions, allowing banks to embed predefined rules directly into the value itself.
Currently, smart contracts enable self-executing transactions that automatically trigger when specific conditions are met, without requiring intermediaries. These programmable features have dramatically increased adoption of institutional stablecoins, with JPMorgan reporting that transaction volumes “exploded by factors of ten, if not hundreds” after introducing such functionality.
Key applications include automated payments based on delivery confirmation, usage-based billing models, and multi-signature approvals for enhanced governance. According to industry experts, this programmability creates unprecedented opportunities for banks to offer tailored solutions across supply chains, subscriptions, and machine-to-machine payments.
New Revenue Streams from Stablecoin Infrastructure
Financial institutions leveraging stablecoin technology can tap into several emerging revenue channels:
- Transaction fees: Banks can generate income by facilitating stablecoin transactions and conversions between digital assets and fiat currencies
- Issuance revenue: Institutions issuing stablecoins earn from minting and redemption fees
- Reserve management: Stablecoin issuers currently invest deposited funds in low-risk assets like Treasury bills, creating interest income
Even capturing just 5% of hypothetical $1 trillion global stablecoin redemption flow could generate approximately $1.83 billion in annual gross revenue for the domestic financial sector.
Evolving Bank-Fintech Partnerships
As stablecoins continue gaining traction, traditional banks increasingly form strategic partnerships with fintech companies.
Banks bring regulatory compliance expertise and established customer trust, whereas fintech partners provide technological capabilities and agility. These collaborations typically involve blockchain companies that develop secure, scalable stablecoin payment systems, tokenized asset platforms, and liquidity management solutions.
Ultimately, these partnerships enable banks to participate effectively in decentralized markets while generating income through activities like stablecoin lending and other digital asset services.
Conclusion
Stablecoins represent a significant shift in how banks approach cross-border payments and settlement systems.
Through successful implementations like JPM Coin processing $1 billion daily and Standard Chartered’s innovative partnerships, traditional banks prove stablecoins’ practical value beyond theoretical potential.
The evidence speaks clearly – stablecoin transactions reduce remittance fees by 80% while unlocking $500 billion in previously idle capital.
Banks adopting this technology gain immediate advantages: round-the-clock settlement capabilities, streamlined operations, and enhanced liquidity management. Additionally, programmable money features enable automated transactions that traditional systems simply cannot match.
Looking ahead, stablecoins will likely reshape banking fundamentals as institutions balance regulatory requirements with technological advancement.
Though challenges remain, particularly around compliance and risk management, the trajectory points toward wider adoption.
Banks that embrace stablecoin technology today position themselves to thrive in tomorrow’s financial ecosystem, where programmable transactions and real-time settlement become standard practice rather than competitive advantages.
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FAQs
Why are banks adopting stablecoin technology for payments?
Banks are adopting stablecoin technology to improve cross-border payments, reduce transaction costs, and compete with fintech disruptors. Stablecoins offer faster settlement times, lower fees (up to 80% reduction), and 24/7 availability, addressing customer demands for instant, cost-effective transfers.
How do stablecoins differ from traditional banking systems for payments?
Stablecoins enable real-time settlement without intermediaries, operating 24/7 unlike traditional banking hours. They significantly reduce operational costs, enhance liquidity management, and eliminate the need for correspondent banking networks, which often cause delays and additional fees in cross-border transactions.
What are some examples of major banks implementing stablecoin solutions?
JPMorgan Chase pioneered institutional stablecoin adoption with JPM Coin, processing about $1 billion in daily transactions. Standard Chartered has partnered to issue a Hong Kong dollar-backed stablecoin, while other regional banks are collaborating with stablecoin infrastructure providers to access these capabilities.
How are banks managing regulatory challenges related to stablecoins?
Banks are navigating the complex regulatory landscape by working within existing frameworks, advocating for clear stablecoin legislation through industry associations, and implementing comprehensive risk management protocols. This includes reserve management practices, regular audits, and enhanced anti-money laundering measures.
What future banking models are enabled by stablecoin technology?
Stablecoins are enabling new banking models featuring programmable money and smart contracts, which automate transactions based on predefined conditions. Banks are also exploring new revenue streams from stablecoin infrastructure and forming partnerships with fintech companies to offer innovative digital asset services and participate in decentralized markets.
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