BIS Study Puts Fintech Money Transfers Ahead of Banks on Cost but Finds Stablecoins Held Back by On-Ramp Fees
BIS Study Puts Fintech Money Transfers Ahead of Banks on Cost but Finds Stablecoins Held Back by On-Ramp Fees #
A Bank for International Settlements working paper has found that fintech money-transfer operators have reduced the cost of cross-border payments compared to traditional bank wires, while stablecoins remain limited by the fees and friction of converting between digital tokens and local currency.
Published on October 19 as BIS Working Paper No. 1385 and titled “Competing Rails for Cross-Border Payments: Banks, Fintechs, and Stablecoins,” the research was authored by Wenxin Du, Catherine Huang, and David Scharfstein. The authors examined three distinct payment rails: conventional banks operating via the correspondent banking network and SWIFT; non-bank fintech money-transfer operators (MTOs) including Wise, Remitly, and the digital arm of Western Union; and stablecoin-based transfers routed over blockchain networks such as Ethereum, Solana, and Tron.
The paper’s central finding is that cross-border payments remain slow and expensive despite advances in domestic digital infrastructure over recent decades. The problem is particularly severe for small-value transfers, where lengthy intermediary chains add fees and introduce settlement delays that vary from corridor to corridor.
Fintech MTOs have improved on what retail bank customers typically face for international wires, the researchers found. By building leaner payment architectures and competing on foreign exchange margins and service fees, operators such as Wise and Remitly have reduced all-in costs across a range of corridors.
On stablecoins, the paper reaches a mixed conclusion. Transfers conducted over public blockchains can bypass correspondent banks and SWIFT, and on-chain gas fees are generally small relative to the amounts being moved. The foreign exchange conversion embedded in stablecoin transactions can also track close to wholesale market rates for major currency pairs, according to the paper. The researchers cite Felix Pago’s US-to-Mexico remittance corridor as an example.
The “stablecoin sandwich,” in which senders convert fiat into a stablecoin, move it across a blockchain, and then convert back to local currency at the destination, introduces its own costs. Users typically face exchange commissions, withdrawal charges, and other fees at on- and off-ramps. Those charges mean the total cost of a stablecoin transfer can match or exceed the cost of a bank wire once the full journey is accounted for.
The paper also challenges the claim that stablecoins remove intermediaries. Centralised exchanges and service providers that handle currency conversions continue to act as gatekeepers, the researchers note, shifting rather than eliminating the intermediary layer. Liquidity constraints in less-traded corridors add a further complication.
The study was published amid heightened regulatory scrutiny of cross-border payment infrastructure and growing commercial interest in stablecoins as a payments medium.
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