The End of Payment Friction: Why Stablecoins and On-Chain Liquidity Win

Global commerce is expanding rapidly, while traditional payment systems remain outdated, expensive, and slow. Businesses and individuals are plagued by high transaction fees and long settlement times, and some businesses cannot even use the banking system.

Before the advent of cryptocurrencies (especially stablecoins), people and businesses have relied on outdated and inefficient systems to transfer funds across borders for decades. The main problems with traditional banks and financial service providers are delayed payments, high fees, and liquidity shortages.

Fortunately, stablecoins and on-chain liquidity providers are solving these problems by providing up-to-date, real-time, and low-cost transactions.

Traditional payment methods leave businesses in a lurch

From merchants in Africa to freelancers in Southeast Asia to businesses in Latin America, individuals and companies have been plagued by cross-border payment delays, high fees, and liquidity issues.

For example, the use of SWIFT (the global financial transaction information network) for global payments has been strongly criticized for its inefficiency. While 66% of SWIFT transactions arrive within 24 hours, funds that do not require manual confirmation usually take one to three business days to transfer under normal circumstances - some transactions can take up to a month if manual checks are involved.

Let’s not forget the transaction fees incurred by using SWIFT – sending fees, receiving fees, intermediary bank fees, and sometimes foreign exchange fees.

The main reasons for the inefficiency of SWIFT transactions include compliance checks, incorrect payment details, and the involvement of multiple intermediary banks.

Traditional fintech is not enough

The rise of digital payment platforms such as Wise, PayPal and Stripe has improved the convenience of payments for many individuals and businesses in developed countries, but they still rely on traditional financial networks.

The problem with traditional payment systems is that demand is growing. According to a report by Foley last August, the value of global cross-border settlements reached $190.1 trillion in 2023, and this figure is expected to exceed $290 trillion by 2030.

Every cross-border transaction must pass through multiple layers of processing and intermediaries to successfully reach its destination, and each layer adds fees and may cause payment delays.

For example, if a Nigerian business receives a payment from Europe, it usually needs to convert funds multiple times (from euros to dollars to naira) before it can withdraw cash from a local bank. This will cause the business to pay additional fees.

This demonstrates the need for a payment system that removes these friction points. Businesses and individuals alike need access to real-time transactions and liquidity. This is why stablecoins like Tether, and on-chain liquidity providers like MANSA have maintained impressive growth over the past few years.

The Real Solution: Stablecoins and On-Chain Liquidity

Unlike the traditional banking system, stablecoins (cryptocurrencies pegged to fiat assets like the U.S. dollar) operate 24/7 without any middlemen, all thanks to the characteristics of blockchain technology — decentralization, immutability, and transparency.

Stablecoins have seen significant growth over the past five years. For example, USDT’s market cap has soared from $4.6 billion in March 2020 to over $142 billion today — with a total stablecoin market cap of over $230 billion. This development demonstrates the asset class’s strong utility in facilitating efficient transactions.

However, to facilitate transactions seamlessly, stablecoins require liquidity. Digital payment infrastructure builders like MANSA are developing solutions to enable fast, flawless transactions around the world by providing on-chain liquidity. The key to achieving instant and transparent transactions is to leverage stablecoins and on-chain liquidity without any third party (such as banks or payment networks).

With stablecoins, the business model in Nigeria will be different. Suppliers in Nigeria can receive USDT from buyers in Europe and then use MANSA's on-chain liquidity pool to instantly convert the funds into local naira. This way, business owners do not have to pay multiple layers of fees and minimize transaction delays.

Stablecoins and on-chain liquidity providers have eliminated delays and transaction costs - the main problem that traditional finance has failed to achieve.

Underserved markets are the biggest winners

The real winners of stablecoin applications are underserved regions such as Africa and Latin America. According to Reuters, Brazil's net cryptocurrency imports reached $12.9 billion in the first nine months of 2024, a year-on-year increase of 60.7%. Notably, stablecoins accounted for nearly 70% of all cryptocurrency transactions in the country in 2024.

The growth of USDT remittances and crypto-to-fiat currency corridors in emerging markets proves that users prefer stable on-chain payments compared to traditional bank payments.

Regulators and policymakers should view stablecoins and on-chain liquidity as solutions because they reduce systemic friction in payments, provide banking services to underserved populations, and make remittances more efficient.

Stablecoins and the Future of Global Payments

Despite their growing adoption, stablecoins and on-chain liquidity providers are not meant to replace traditional financial institutions, but to improve them. The future of payments lies in flexibility, speed, and accessibility.

Financial institutions, payment services, and businesses have integrated stablecoins into their payment processes. Last year, Wise became the first foreign company to gain access to Zengin, a Japanese bank payment clearing network. By eliminating intermediary banks, the company can significantly reduce cross-border transaction fees.

The shift from traditional finance to stablecoins is not speculative—it is happening as demand for transparent, low-cost, and seamless global transactions grows. The rise of on-chain liquidity could reduce reliance on an outdated banking system.