Why Does the Payment Narrative Endure? From Budget Airlines’ Covert Expansion to the Trillion-Dollar Settlement Infrastructure of Stablecoins and AI Agents
Author: Prathik Desai (The Token Dispatch)
Translated by: TechFlow
TechFlow Highlights: Amid an industry-wide correction in Layer 2 governance token valuations and a cooling of pure speculative narratives, the cross-border payment and stablecoin settlement sector continues to attract heavy investments from top-tier venture capital and Wall Street institutions. Mastercard's $1.8 billion acquisition of BVNK, Stripe's $1.1 billion merger with Bridge, and PhotonPay's recent $40 million Series C funding round all reveal the capital market's fierce demand for deterministic infrastructure capable of capturing genuine transaction fees and float-based interest spreads.
Starting with the classic business case of budget airlines that acquire customers with cheap tickets while secretly taxing them through checked baggage and seat selection fees, this article thoroughly dissects the inherent frictions and Herstatt risk embedded in modern multinational correspondent banking networks. While blockchain technology has driven the cross-border transfer cost of funds themselves to an extreme minimum, barriers surrounding fiat on/off ramps, compliance licensing frameworks, and foreign exchange control frictions remain high. Drawing on Clayton Christensen's classic Law of Conservation of Attractive Profits, the author expertly deduces the ultimate survival trajectory for future payment enterprises: when payment rails themselves degenerate into public pipelines with zero premium, only those who deeply embed themselves in corporate daily cash management, provide working capital credit, and offer machine-to-machine settlement services for emerging autonomous AI agents will truly build an unshakeable commercial moat.
When Transferring Funds Becomes So Cheap
We have all likely experienced booking budget flights. On the booking interface, that ticket price might not even cover a decent dinner in the city center. You can easily bask in the joy of scoring a bargain for a while.
But some take longer to suddenly realize: that so-called budget airport is actually over two hours away from the destination city named after it.
By the time you finally drag your exhausted self to the hotel, that originally cheap ticket ends up being the smallest expense of your entire trip.
Sending money overseas is fundamentally the same story. The emergence of crypto assets has indeed made the cross-border transfer "transit" itself exceptionally cheap. You might naively assume the story ends there, but reality tells a different tale.
Banks never publicly disclose exactly how much windfall profit they make per international wire transfer, prompting three Harvard Business School academics to test their own transfer records.
In a paper published by the Bank for International Settlements (BIS), they tracked eight international remittances sent through major commercial banks and found that clients paid an additional premium of 2% to 4.7% solely on exchange rate conversions. Note that this was already the extracted cost before any explicit wire transfer fees were charged by the banks.
In another independent study, researchers from the Bank of Italy used channels available to ordinary retail customers to attempt sending 200 USDC between Italy and five other countries. They precisely measured the total cost and complete duration for funds to travel from origin to destination.
From a superficial macro perspective, stablecoins do appear like savior superheroes. IMF staff audited 270 remittance routes, and Tobias Adrian presented this data in his personal capacity at a June BIS meeting: on routes matchable with World Bank data, the average cost to send $200 via stablecoins was only around 1%, compared to 5.8% for traditional methods—a reduction in fees from nearly $12 to roughly $2.
But the Italian scholars then delivered a somewhat harsh reality check. They meticulously compared their USDC transfer against Wise, the current mainstream flat-rate cross-border financial tool. The total actual cost across the encrypted channel fluctuated wildly between 0.30% and nearly 9% in the test, translating to a fee of just 60 cents on the best route, but skyrocketing to nearly $18 on the worst.
Ultimately, across all tested routes, USDC outperformed Wise on three paths but lost on four, meaning it does not stably maintain an overall cost advantage. Most intriguingly, the blockchain network itself consumed an average of just 0.4% of the transfer amount throughout the entire fund movement, roughly 80 cents. The vast majority of the fee bill was entirely consumed by the fiat on/off-ramps.
Fig.: Bank of Italy's actual test comparing total cross-border transfer rates for $200 (USDC vs. Wise)
Compared to industry-average expensive cross-border bank wires, stablecoins appear extremely cheap; but when facing a mature, top-tier fintech platform like Wise, stablecoin corridors face much greater difficulty in achieving a decisive victory in actual experience and comprehensive rates.
On October 29, Hong Kong-headquartered cross-border payment provider PhotonPay announced completion of a $40 million Series C funding round led by Blockchain Capital. Since bridge fees at the blockchain layer are never truly the expensive part, I am very curious what underlying assets these venture investors actually believe they are paying for.
On June 26, 1974, German regulators ordered the closure of a commercial bank named Herstatt, which suffered catastrophic losses from aggressive one-sided bets in the foreign exchange market. The timing of its shutdown triggered historic financial turbulence: regulators chose to close the bank in the afternoon of a regular German business day, while the U.S. market across the Atlantic had not yet opened.
Counterparty banks executing FX delivery trades with Herstatt Bank had already paid the agreed-upon full amount in Deutsche Marks and were awaiting corresponding USD settlements later that day. Those dollars never arrived on schedule, however, because by the time New York woke up, Herstatt's doors had already been permanently sealed shut. Several large financial institutions were severely impacted, and the nation's most crucial foreign exchange clearing system was even forced offline for a full 24 hours.
Today, the global payments industry still refers to this settlement gap risk as Herstatt risk. This crisis taught a profoundly enlightening lesson to bankers worldwide: a cross-border payment is essentially two completely separate local payments occurring in two different time zones. Funds can absolutely complete the first half of their journey but strand completely short of the finish line in the second half.
A standard international wire transfer requires multiple intermediary hops. Your originating bank rarely establishes a direct clearing channel with a local bank far away in Brazil, so the money must sequentially penetrate a long clearing corridor constructed by correspondent banks at various levels. Each intermediary bank in this chain must constantly front-load substantial FX positions as liquidity reserves for settlement, and each reserves the right to deduct an intermediary bridge fee while conducting complex, independent anti-money laundering compliance reviews.
Fintech pioneers like Wise and Remitly were able to disrupt this old system precisely because they pre-funded their own accounts within local banking networks across major countries and regions globally. They can settle funds directly through these local account networks without forcing every transfer to crawl slowly along complicated international correspondent chains.
Stablecoins accelerate a completely different link. Tokens can race at ultra-fast speeds across global public chains 24/7, with chain settlement responding in milliseconds even during traditional weekends when multinational commercial banks collectively shut their doors.
However, waiting at the finish line cannot be entirely eliminated. SWIFT officially claims that about 90% of its transfer instructions are processed within an hour of issuance, but according to in-depth tracking by the BIS, a significant proportion of funds still end up waiting two working days or longer for final withdrawal after crossing borders.
The Bank of Italy's test also captured the same phenomenon: in regions like Brazil's Pix, where central bank-grade real-time settlement systems are already widespread, fund crediting is almost instantaneous; but in peripheral Latin American or African markets lacking such advanced financial infrastructure, funds often fall into prolonged bureaucratic review and reconciliation stalemates after landing.
University of Surrey researcher Atta Addo once conducted in-depth research on Nigeria's famous Computer Village in Lagos. Hundreds of thousands of small and medium merchants there constantly import various electronic components and digital products from Asia, and their business lifelines depend entirely on whether they can pay overseas ad networks and suppliers on time.
Purchasing overseas digital ads is often the harshest real-world scenario here. Platforms like Meta will immediately suspend ad accounts and halt ad delivery if payments are not received within the billing cycle. For merchants racing against time who rely on ad spend to drive cash flow, even a half-day delay in payment means that day's orders vanish into thin air.
What is PhotonPay
In its latest funding announcement, PhotonPay highlights an annualized fund processing volume of $65 billion. This startup born in Hong Kong is attempting to stitch all these fragmented and complex clearing channels into a unified, end-to-end enterprise service portal.
Essentially, PhotonPay is a comprehensive payment technology platform empowering businesses to achieve seamless acquiring, currency conversion, cross-border settlement, and expense management globally. It not only provides virtual and physical cards (including plastic and custom metal cards) to small and mid-sized cross-border merchants, but also offers customized card issuing capabilities for large outbound platforms.
Fig.: PhotonPay fund top-up, multi-type card selection, and global consumption mechanism breakdown
PhotonPay currently holds 34 financial business licenses and authoritative compliance credentials across major jurisdictions worldwide. This is its most critical foundational advantage, as it allows outbound merchants to告别 (bid farewell to) those precarious underground payment channels, operating forex entirely within a compliant, transparent architecture.
BlueFocus Media's cross-border advertising intelligent outbound service platform, Luban, vividly illustrates the immense value of this licensing infrastructure. Luban assists tens of thousands of Chinese outbound merchants daily in batch-settling huge advertising fees with overseas traffic giants like Meta, Google, and TikTok, relying on a multi-currency virtual credit card clearing backbone built atop PhotonPay to achieve millisecond-level batch deduction and payment.
PhotonPay has not publicly disclosed the precise proportion of stablecoin settlement versus traditional fiat channels within its $65 billion in total annual volume. Yet the company precisely relies on minute fee accumulation across the entire chain to earn steady profits: its public fee schedule shows a clearing fee of approximately 0.2% to 0.3% per USD transfer, while its card issuing business continuously captures cash flow through interchange fee splits.
By contrast, unicorn Airwallex, valued at over $10 billion, processed over $100 billion in annual volume in 2024 and generated roughly $560 million in net revenue. Although the payment track features minuscule fees per transaction, the accumulated cash flow against the massive foundation of international trade is remarkably staggering.
Fig.: Enterprise fund flow diagram within PhotonPay's system: deposits, conversions, card issuing, and accounting routing
In the Industry's Giant Waves, $40 Million Is but a Drop in the Ocean
If placed against the broader waves of M&A and financing in the global payments industry, PhotonPay's $40 million Series C round is merely a relatively insignificant footnote.
Earlier this August, traditional card giant Mastercard splashed out $1.8 billion to acquire stablecoin infrastructure pioneer BVNK; shortly after, the world's largest digital payment unicorn, Stripe, acquired stablecoin clearing network Bridge, founded by former Coinbase executives, for a staggering $1.1 billion. Giants are vying for the underlying foundation of next-generation digital payments with billions in hard cash.
Industry giant Wise chose an extremely capital-intensive moat strategy: it bypassed costs to directly penetrate and connect to central bank local clearing systems in eight major countries globally, opening clearing accounts directly within these local systems; meanwhile, Bridge, operating at a lower technical stack, focuses on developer-friendly APIs, allowing software developers to execute compliant stablecoin-to-local-fiat routing anywhere globally with just a few lines of simple code.
PhotonPay spent a full decade painstakingly building a compliance matrix woven from deep credit relationships with banks in multiple regions globally, 34 core financial licenses, and dozens of local clearing channels worldwide. This highly gritty, labor-intensive license accumulation can never be replicated overnight by pure Web3 teams that merely write a few lines of smart contract code.
If you ask me: among pure public ledger access rights, 24/7 direct global local bank connection pipes, and a massive base of multinational terminal merchant clients, who holds the strongest hand in future payments? The answer is undoubtedly the latter.
In the business relationship between Luban and outbound advertisers, what is truly unbreakable is Luban's direct control over client accounts and daily operational workflows. Advertisers do not care at all whether underlying funds move via SWIFT wire transfers or fly lines of USDC on Ethereum or Solana; they only care whether ad deductions are interrupted.
You only need to examine the revenue structures of these giants to clearly see this irreversible trend: in Wise's latest disclosed financial report, nearly half of its net operating revenue actually does not come from traditional cross-border remittance fees, but rather from interest-sharing on deposited customer funds, card issuance and swipe revenues, and various premium cash management value-added services. Airwallex has also publicly stated that over 90% of its revenue contribution comes from mature clients purchasing two or more comprehensive products.
Fig.: Comparison of three core enterprise fund flow paths: PhotonPay, stablecoin-first platforms, and traditional fiat fintech
Meanwhile, the previously high exchange rate spreads in emerging markets are being visibly flattened. Between 2021 and 2024, exchanging stablecoins for Indian Rupees still offered an offshore arbitrage spread of about 5.5% above official benchmark rates; but by 2025 to 2026, this spread rapidly narrowed to 2.9% or even lower. These spreads are essentially institutional rents spawned by foreign exchange capital controls, and such rents will inevitably continue to fade as clearing channels diversify.
Spread narrowing serves as a fatal alarm for all pure conduit operators. In transfers targeting developed European and American markets, the comprehensive fees charged by mature fintech platforms for transactions exceeding $10,000 have been squeezed by intense competition to between 0.4% and 0.6%, with giants like Wise actively and frequently lowering prices to squeeze competitors. If pure cross-border fund movement completely degenerates into a commodity with zero marginal cost, the only defense line for payment companies is to sell customers high-barrier products that are definitely not the corridors themselves.
What Does This Ultimately Mean for Payment Companies
New-generation fintech companies represented by PhotonPay, Airwallex, and Reap are, in essence, cleaning up the messes that traditional commercial banks cannot afford to attend to. The unique business arithmetic hidden behind these remnants is precisely why top global VC firms are still willing to pay generously for them.
The first dilemma is inflexible fixed costs that cannot be amortized. For a traditional commercial bank, executing complex KYC due diligence, verifying cross-border trade customs declaration documents, and providing manual customer service support for a client incurs nearly identical compliance costs whether for a $2,000 small transfer or a $2 million large cross-border M&A payment. Because banks can easily earn huge returns on large transactions via fixed percentages, their most rational commercial choice for time-consuming and labor-intensive small and micro cross-border merchants is to unequivocally turn them away.
Fig.: Breakdown of single-transaction marginal costs for Wise in the GBP to EUR clearing corridor
According to long-term statistics from the BIS, between 2011 and 2022, the number of active international correspondent banks in Africa plummeted by approximately 34%, while in South America, this figure shockingly declined by 50%. Traditional global banking is retreating in plain sight from large-scale clearing networks in peripheral markets.
Fig.: Sharp decline trend in the number of active multinational correspondent banks across global regions (2011 to 2022)
Tech companies like PhotonPay only need to buy out the setup costs of their financial compliance systems and multi-country clearing channels once, allowing them to amortize fixed expenses across over 200,000 outbound merchant clients served. This is the immense power of economies of scale: it enables providing highly efficient services tailored for small and micro cross-border sellers worldwide at extremely low marginal costs, which traditional banks would never deign to build specifically for them.
The second dilemma is precious time, which in modern business can be directly converted into opportunity costs. Imagine a cross-border merchant investing a $1,000 ad spend budget that, upon conversion, could generate up to $3,000 in gross merchandise sales profit. If using a high-fee rapid credit card channel, the merchant pays a 1% issuing bridge fee ($10); but if opting for a seemingly cheaper traditional wire channel that takes two to three days to settle to save a few percentage points in fees, causing their ad account to be suspended by the platform due to non-payment, the merchant will in vain lose the entire $3,000 in potential revenue. This is why any rational business operator would rather decisively abandon the so-called cheapest channel and unhesitatingly pay for certainty and timeliness.
The third dimension, and the one with the most imagination space, is cross-border credit and liquidity empowerment. In cross-border trade, outbound merchants often need to advance huge sums upfront for factory procurement and inventory preparation, as well as platform traffic purchases, before sales proceeds are actually credited. Because the true qualifications of small overseas cross-border sellers are extremely difficult for local banks to verify through the chain, in traditional credit markets, uneven information asymmetry forces quality merchants to bear high rejection costs alongside high-risk ones. Data calculations from the Asian Development Bank (ADB) show that the global unsatisfied trade finance gap reached a shocking $2.5 trillion in 2025.
However, a payment platform that can fully penetrate a merchant's entire daily cash inflow and outflow statements knows the company's actual operational health and fulfillment capacity intimately. It can completely leverage extremely real on-chain and ledger transaction flows to provide small-scale working capital lending services to merchants with high certainty, earning highly resilient interest income from it—a revenue stream completely decoupled from the volatility of corridor transaction fees.
The Complements Law: Where Profits Flow When Infrastructure Is Free
Harvard Business School masters Clayton Christensen and Michael Raynor proposed a highly incisive business theorem in a management classic: the Law of Conservation of Attractive Profits.
This law reveals a brutal yet universal commercial rule: when a specific link in an industrial chain becomes extremely cheap or easily replicated at low cost due to technological standardization, modularity, and abundant proliferation, the massive, lucrative profits originally entrenched in that link will inevitably migrate en masse and settle into adjacent proprietary complement links.
In today's global cross-border payments landscape, the action of transferring a string of value-representing digits from one side of the ocean to the other is accelerating into completely free infrastructure under the ruthless crushing of public chains and open-source financial protocols.
The true complements tightly dependent on this corridor are the integrated workflow accounts where enterprises must log in every morning to make all financial decisions, the multi-currency merchant cards relied upon to allocate funds, and automated asset management systems capable of carrying out autonomous checkout and procurement for future AI agents.
When a payment tech company successfully binds merchants tightly to its ecosystem through high-frequency card issuing and settlement networks, it not only continuously extracts tiny but stable fee splits from subsequent fund movements, but also naturally seizes absolute dominance over the settlement of the merchant's next business cycle, simply because the merchant's floating funds reside inherently within its account system.
Therefore, when top-tier venture capital continues to pour hard cash into new-generation payment tech companies today, they are fundamentally not betting on a cheap conveyor belt for funds; they are betting on ultimate business foundations that run so deep into customers' daily real workflows that switching them would require tearing down and reconstructing the entire enterprise operation process.