Focus
We focus on the costs of cross-border payments across three payment channels: traditional banks, fintech money transfer operators (MTOs) and stablecoin-based transfers. Despite improvements in domestic payment systems, sending money internationally remains expensive, particularly for small transfers. We examine how payment architecture, foreign exchange (FX) pricing and intermediary fees shape these costs. It also studies whether stablecoins can overcome the frictions associated with existing payment channels.
Contribution
Combining intraday pricing from fintech MTOs, World Bank remittance data, bank wire transactions and crypto market data, we construct comparable measures of cross-border payment costs across currencies and transfer sizes. We distinguish FX markups from explicit fees, including exchange trading charges, blockchain transaction fees and fiat withdrawal costs. We examine both transfers using a single dollar-linked stablecoin and those involving on-chain exchanges between stablecoins denominated in different currencies.
Findings
There are three sets of findings. First, fintech money transfer operators (MTOs) substantially reduce cross-border payment costs relative to traditional retail bank wires. In our small sample of bank transactions, FX markups range from approximately 2 to 4.7%, even for highly liquid currencies and before accounting for explicit wire fees. By contrast, fintech transfer costs are considerably lower and decline substantially as a share of the amount sent as transfer size increases. For $10,000 transfers from the United States, median costs across developed market currency groups are around $40–$60, although some currency destinations remain considerably more expensive.
Second, using stablecoins to transfer funds across borders requires conversions between fiat currencies and stablecoins. These conversions still rely on crypto exchanges and other intermediaries, whose trading, conversion and withdrawal fees can substantially increase the total cost. Recipients may also have to wait for stablecoin conversion and bank processing before they can access the funds in their bank accounts. Moreover, liquidity between US dollar stablecoins and non-US currencies is generally very thin.
Third, stablecoins can offer favourable FX pricing for transfers from developed markets to some emerging market economies. However, this advantage reflects distortions associated with capital controls rather than the underlying technology. Limited market depth and volatile pricing also constrain the scale of such transfers. Ultimately, the competitiveness of stablecoins as cross-border payment rails depends not only on blockchain technology but also on market liquidity, reliable access to fiat currencies, regulatory compliance and trust in intermediaries.
Abstract
Cross-border payments remain slow and expensive despite significant improvements in digital financial infrastructure over the past several decades. This paper compares the cost of sending cross-border payments across three payment rails: traditional banks operating through the correspondent banking system and SWIFT, fintech money trans fer operators (MTOs) such as Wise, Remitly, and the digital arm of Western Union, and stablecoin-based transfers. We construct harmonized all-in costs measures across these three rails for different corridors and payment values. We find that fintech MTOs have significantly compressed the costs of cross-border payments, and demonstrate that stablecoins are not a panacea for frictions in cross-border payments.
- Discussion by Tobias Adrian