By Prathik Desai
Translated by Saoirse, Foresight News
All great technologies are powerful equalizers, establishing a universal baseline for the full value that can be created on top of them. The mobile phone and the internet are perfect examples from the 20th century, and blockchain is poised to become the comparable technology of the 21st century.
Persistently high remittance costs have long been a pain point in international payments. However, the cost of cross-border transfers is not made up of a single fee; the entire process involves multiple layers and participants, each charging fees for different parts of the cross-border transaction.
This article deconstructs this industry architecture, explaining how on-chain and off-chain platforms collaborate to capture value within this iterated remittance system, which can lower remittance fees and accelerate cross-border capital flows.
Capital movement inherently incurs costs, and cross-border transfer expenses are even higher. The issue is that users silently bear these costs without fully understanding what they are actually paying for.
Suppose you work in the US and send $100 home, but your family in Mexico only receives an amount equivalent to roughly $94 when converted to pesos. The lost $6 might seem like the standard cross-border transfer fee. Yet the fee displayed on screen is only about $2, less than half of the $6. Where did the remaining $4 go?
A standard remittance transaction goes through multiple intermediaries, each controlled by specific institutions that take a cut. The largest portion usually comes from the foreign exchange conversion segment: dollars must be converted to pesos before being deposited into a Mexican account. Banks add a spread on top of the mid-market rate, costing about $3, which accounts for half of the total expense.
Cost Breakdown of a $100 Cross-Border Remittance from the US to Mexico
With the emergence and gradual adoption of stablecoins, we once thought they would completely revolutionize cross-border remittance. But where does reality lead? Blockchain is merely a barrier to entry, not a competitive moat; it cannot create an industry monopoly.
True value lies in off-chain operations: obtaining licenses, building banking partnerships, and enabling end-user cash-out. Different countries and regions have vastly different regulatory rules and banking system requirements. The remittance market will see a surge of regional leaders, each cultivating its own remittance corridor to build insurmountable advantages; these advantages can stem from license resources, strong distribution channels, or cross-selling capabilities. This article traces how this industry architecture evolves to this point.
The above diagram illustrates only one transfer path: sending $100 from the US to Mexico. If switched to corridors like Europe to Asia, or categorized by person-to-person versus business-to-business remittance types, the cost structure changes according to the unique challenges faced. Every remittance corridor and scenario has its own bottlenecks; as bottlenecks shift, market opportunities and value distribution shift accordingly.
Hoping for Cheaper Remittances
The US-Mexico corridor is a relatively mature case, representing the world's largest bilateral remittance route. Both ends have well-developed payment infrastructure, and market competition has driven fees for USD transfers to Mexico down to 4.53%. Mexico also has the lowest receipt costs among G20 nations. Additionally, the Mexican peso enjoys ample liquidity, and the country's real-time payment system, SPEI, processes transactions instantly around the clock. If all corridors reached this level, blockchain would have little room to operate.
World Bank data shows the global average remittance fee is 6.36%, more than double the UN target. Sub-Saharan Africa faces particularly severe conditions, with an average fee of 8.46%, and 13 African corridors exceed 20%, making it the region with the highest receipt costs globally. In contrast, the Middle East, North Africa, Afghanistan, and Pakistan region boast the lowest global receipt fees, averaging 5.11%.
Costs stem from friction. In receiving countries with well-established banking systems and reliable local payment channels, like Mexico, most problems are already solved, limiting blockchain's role. But in regions lacking bank services, facing high costs, or suffering from public distrust in banks, blockchain becomes the natural choice. Globally, there are about 20 remittance corridors completely lacking low-cost services, most of which are intra-African transfers.
The biggest bottleneck for any corridor is the FX spread, which depends on the trade intensity between the two economies. Frequent trade means both countries hold each other's currencies, ensuring liquidity. Strong US-Mexico trade activity ensures ample USD/MXN liquidity, leaving banks with almost no room to markup. Conversely, when trade is sparse, neither side has incentive to hold the other's currency, leading to severely inadequate FX market liquidity.
This relationship between trade and FX markets creates a paradox: places with the highest demand for remittances often face the highest transfer costs.
Analysis of Major Cross-Border Remittance Corridors
Different Transfer Scenarios Face Different Challenges
Geography is just one factor; the type of transfer business is equally crucial.
The $100 example above falls under consumer-to-consumer (C2C) transfers. In 2025, C2C remittances accounted for less than 5% of retail remittance transaction volume but contributed 14% of industry revenue, with an average fee rate of 3.1%, the highest among all business types. Business-to-business (B2B) remittances are the opposite: highest transaction volume but extremely low fee rates.
Cross-Border Payment Volume and Revenue by Business Type in 2025
The roots impeding scale development differ for the two. C2C transfers involve small amounts and are mostly one-off; identity verification, compliance checks, end-user cash-outs, and marketing all raise customer acquisition costs. Thus, the core of C2C competition isn't FX conversion but channel distribution. Underlying payment corridors are becoming homogenized; the key is acquiring and retaining remittance users at low cost to capture value.
Conversely, B2B transactions feature large amounts and high frequency, with slim fees. Business scale is capped by working capital constraints. To achieve same-day arrival for a recipient in Manila, a service provider must pre-deposit pesos into a Manila account, known as pre-funded balances. If serving multiple countries, these pre-funds accumulate rapidly across regions, making it difficult for a single company to bear.
Thus, different scenarios require different solutions: C2C remittances need lower customer acquisition and distribution costs, while B2B remittances require reduced capital lock-up to enable timely arrivals across corridors and minimize pre-funding. Several blockchain projects are restructuring the industry architecture around these two scenarios.
Who Took My Profits?
With infrastructure now largely complete, blockchain is ironically the easiest part to build. While blockchain can reduce settlement and FX conversion costs, since everyone can use it, this cost compression doesn't yield a unique competitive advantage. All blockchain-using participants start on equal footing; all contestable value flows off-chain. Only local companies holding exclusive licenses, banking partnerships, and mature on/off-ramp networks stand a chance to capture the largest share of value.
The core functions of each tier in the new remittance architecture haven't fundamentally changed; it's merely using new assets for settlement, reshuffling the value distribution landscape.
Every remittance begins at the customer interaction layer. Apps with massive traffic can build transfer entry points, solving C2C remittance pain points.
Felix Pago leverages WhatsApp to facilitate remittances, allowing immigrants to avoid downloading a new app. Sending $200 via Felix Pago yields 3,680 Mexican pesos, compared to Wise's 3,604. Felix Pago settles using stablecoins on-chain, but users just see their familiar messaging app.
Its distribution channel is its moat. Relying on this, Felix Pago completed a $75 million Series B round, achieving annualized transaction volumes in the billions.
How Many Pesos Can $200 Buy When Sent to Mexico on Felix vs. Wise Platforms
The on/off-ramp layer is the hardest part of the entire system. Stablecoin transfer costs are nearly negligible, but converting fiat to/from stablecoins is the exact dilemma of most crypto-payment solutions. Each country has independent banking systems, regulatory licensing requirements, and cash usage habits; on/off-ramp infrastructure must be built market by market. Only companies deeply rooted in a single region can amortize investment costs and achieve commercial closure. This determines that winners in this space are regional specialists, not a single global on/off-ramp solution.
Yellow Card obtained money transmission and virtual asset service provider licenses in over 20 African countries, connecting banks and mobile money networks to enable bidirectional fiat/stablecoin exchanges for naira, cedi, rand, etc. Gathering full licenses takes time and is costly, so Yellow Card chose to commercialize this infrastructure externally, profiting from on/off-ramp fees and enterprise transaction volume rather than charging regular consumers.
Kotani Pay bridges stablecoins to mobile money via USSD, enabling cash-out on basic phones without internet access. Few companies are willing to undertake such labor-intensive yet necessary integrations.
Coins.ph is a licensed Philippine on/off-ramp provider, integrated with the domestic real-time payment system and cash agent network, earning revenue through licensing resources and payout reach.
Looking globally, the on/off-ramp stage is riddled with localization hurdles. This is why regional players capture value here; Yellow Card and Coins.ph each cultivate their respective corridors without competing for market share.
ZyntaFinance addresses similar pain points for enterprises. Most African currencies lack direct trading pairs. Transferring from Accra to Lagos requires routing funds through correspondent banks in New York or London, first converting cedis to USD, then to nairas. ZyntaFinance settles using stablecoins, charging 0.5%-1% per transaction, and dynamically selects the optimal public chain (Solana, Ethereum, Stellar, etc.) based on real-time costs.
The orchestration layer primarily serves B2B business. Orchestration providers centrally manage payment corridors, stablecoin types, and remittance routes, packaging on/off-ramp and settlement capabilities into API interfaces. This layer didn't exist in the old architecture; current industry giants are aggressively acquiring companies to position themselves here.
Stripe acquired Bridge for approximately $1.1 billion. Developers don't need to worry about wallets, public chains, or licensing details; calling the API completes cross-border transfers. Leveraging its massive merchant base, Stripe takes a fee from each transfer, driving rapid scale expansion.
Mastercard spent $1.8 billion acquiring BVNK to enable multi-corridor fiat and stablecoin settlement for large enterprises, backed by compliant licenses in various regions.
The orchestration layer is one of the few tiers where a global leader could emerge. Companies like Stripe and Mastercard can connect all remittance corridors through a single API. Even so, global orchestrators cannot control naira cash-out corridors, Philippine payout licenses, or local Manila bank accounts; they must integrate with regional leaders. Global giants effectively become clients of local service providers, meaning value flows downward to regional heads along each route rather than pooling entirely at the top.
Stablecoins restructure the seven-tier remittance supply chain, compressing the cost of a $100 cross-border remittance from $5.99 to $1.10, replacing SWIFT with stablecoins for settlement.
The Float Yield Ecosystem
The settlement asset layer replaces traditional cross-border messaging systems. Stablecoins replace SWIFT messages and prepaid Nostro accounts, enabling 24/7 settlement.
Value at this layer comes from reserve assets. Circle holds billions in US Treasuries as USDC reserves, earning interest that ordinary token holders cannot access. In 2025, Tether generated over $10 billion in profit through this model, targeting emerging markets with the most severe remittance issues. This is precisely why traditional giants like Western Union, Visa, and PayPal are racing to issue their own stablecoins instead of relying solely on third-party ones.
The FX layer, once the most profitable segment in the old architecture, now sees bank markups compressed from 50-150 basis points to single-digit costs under the new system.
OpenFX quotes spreads of just 3-12 basis points, using stablecoins as the settlement channel for FX trades. It hedges FX exposure primarily through offsetting orders, and absorbs positions internally when hedging isn't possible, thereby offering real-time fixed rates.
If market liquidity is poor or currencies are highly volatile, holding internal positions carries high risk, so OpenFX transfers risk to local banks or OTC desks in exchange for lower profits. Internal order matching reduces capital requirements, further amplifying the contribution of fee income to profits. dLocal adopts this model in Africa, Latin America, and Asia, maintaining fee rates around 0.7% and surviving on transaction volume rather than high margins.
The clearing netting layer optimizes capital efficiency. Netting offsets bidirectional transactions, transferring only the net residual after mutual cancellation. The clearing layer handles multi-party netting, completing net settlement.
As mentioned earlier, service providers need to pre-fund in various countries. Companies like OpenFX and dLocal rely on clearing netting to reduce the scale of idle capital stranded across different nations.
Institutions like Ubyx, t-0 Network, and Cycles achieve bidirectional trade hedging, requiring no pre-funded capital from either party. Someone sends USD to Manila while another sends pesos back; the two transactions cancel out, eliminating the need for actual fund transfers. Clearing agencies pool bilateral debts into a single net figure for settlement, charging fees for their netting services.
Though currently small in scale, this model can unlock hundreds of billions in tied-up capital. Launched in early 2026, t-0 Network already supports cross-border payments for 1,200 FX pairs. From January to August 2026, B2B stablecoin settlement volume reached $150 billion, up 40% year-on-year.
Comparing the old and new industry architectures, we can clearly see what has changed and what remains the same.
Traditional Remittance Architecture vs. Stablecoin Remittance Architecture
Historically, most profits were captured by the FX conversion segment. Today, profits are redistributed across three major sectors: the interaction layer controlling scarce traffic, the orchestration layer sought after by giants for acquisition, and the settlement asset issuers earning reserve interest.
Value flows toward entities holding scarce resources within each corridor: whether trusted user-facing interaction gates, compliant licensing conditions, or massive reserves that passively generate yield. On-chain segments struggle to capture high value; stablecoins merely accelerate cross-border USD circulation, but ultimately, someone must still hold pesos in Manila to complete the dollar conversion.
The cross-border remittance case holds broad lessons. Blockchain lowers transfer costs but won't allow any single company to build a moat solely around this efficiency. In the Web2.5 era, protocols handle the underlying work while applications control users. Cross-border remittance adds a geographic dimension: infrastructure becomes global, but differentiated competitive barriers remain firmly rooted locally.
American senders still remit $100, and families in Mexico receive a few extra dollars on the same day. Yet most of the generated revenue falls into the pockets of companies headquartered in cities unknown to and unvisited by both parties.
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