Stablecoin's Real Competition is NOT Swift

“Faster and cheaper than SWIFT” - that’s the tagline often used to champion stablecoins in cross-border payments. But it's the wrong comparison.

Nearly 55% of SWIFT’s volume comes from high-value interbank settlements, not the kind of low-value, high-frequency transactions that power global commerce for SMEs and consumers.

SWIFT was built in the post-WWII era to connect banks across major trade corridors, such as the US, UK, Europe, and Asia, facilitating booming cross-border commerce and the corresponding bank transfers via secure messaging and standardization. Over the decades, it evolved, but its architecture still reflects its interbank roots.

Meanwhile, a new generation of payment infrastructure has emerged: one purpose-built for a globalized digital economy. New payment infrastructure that are built for the kind of high frequency and low value transactions that power commerce for SMEs and consumers came onto the scene.

The real benchmark for stablecoins isn’t SWIFT. It’s neobanks like Wise, which have quietly built one of the most efficient global payment networks for low-value transfers.

Let’s look at a few stats.

SWIFT:

76% of SMEs expect payments to reach the beneficiary in less than an hour

79% of consumers expect payments in less than an hour

Wise:

65% of payments take under 20 seconds

95% of payment arrives within 24 hours

To win the B2B payments race, stablecoins must outperform Wise, not SWIFT, on speed, reliability, and global reach.

And the upside? Massive. According to SWIFT, “low-value (<$100K) cross-border payment flows now exceed $12 trillion annually.” That’s the true prize.

In this week’s edition, we break down Wise’s global payment infrastructure so we can understand exactly what stablecoins are up against.

Let’s dive in.

A Cross Border Tale of Three Rails

Let’s say Bob in Brazil wants to send money to Alice in Australia. The outcome, funds received in AUD, is the same. But the path taken varies dramatically depending on the payment rail.

On a traditional correspondent banking rail, the transfer goes from Bob's bank, say Bankrisul, to another local bank, say Santander Bank, with a correspondent banking relationship with Alice’s Australia bank, say ANZ. 

Because there is no direct BRL/AUD pair, Bob’s bank or the correspondent bank does the FX swap via the route BRL→USD→AUD, and then sends the AUD to Alice bank ANZ who then credits Alice’s account. 

The transfer has to go through multiple hops on this rail and thus incurs multiple fees and delayed settlement. 

On the Wise rail, the transfer becomes much simpler. Bob pays BRL to Wise Brazil instantly via instant local payment rail PIX. Wise Brazil maintains a local BRL account and has indirect access to PIX rail via its partnering bank in Brazil.

Wise uses its own internal FX engine to price and convert BRL to AUD using mid-market rates. Wise also keeps a local Australia bank account in AUD. It then sends the said amount AUD to Alice’s bank account at ANZ via Australia’s domestic instant rail NPP.

Behind the scenes, Wise will rebalance between its Brazil and Australia Nostro accounts via treasury and FX liquidity management.

On a stablecoin rail, the steps involve Bob converting BRL to USD stablecoin via a centralized exchange and then send the USD stablecoin to Alice’s wallet. This happens in seconds. Alice then does the FX exchange from USD stablecoin to AUD fiat on her local crypto exchange and offramp it into her bank account.

Below is a comparison across three payment rails key dimensions:

If stablecoins are to win the cross-border B2B race, SWIFT is not the competition. The real benchmark is Wise, whose payment network is:

• Localized

• Instant

• Transparent

• User-friendly

  
  

The one nuance to point out is that Wise’s ability to execute its cross-border magic depends on its own internal FX engine’s ability to source and price FX swaps efficiently. And that is not always the case across the world. And thus opportunities for stablecoins to serve the market.

Beating the Benchmark

Wise and other neobanks have set the benchmark for stablecoin payment firms to beat. Wise’s infrastructure rail, consisting of licenses, PSP integrations and local instant rails access, has been solving cross-border payment issues for many. After all, Wise delivers 95% of all payments within 24 hours.

If stablecoins want to compete meaningfully in this space, they’ll need to do more than promise faster settlement. They must outperform on all fronts.

The one clear dimension stablecoin rail excels at is near instant straight-through settlement. No internal rebalancing needs to happen afterwards. When multi-currency stablecoins reach scale, the instant PvP settlement capability between tokenized FX crosses will be a killer feature for onchain FX market. 

But there are many areas of improvement.

1. UX 

Today’s stablecoin workflow remains clunky. The very mannual workflow process involved such as sending fiat to exchanges, executing local currency to USD stablecoin trades, and offramping to wallets or fiat bank accounts should be hidden. 

The whole experience should be as simple as clicking a send button on a mobile app. 

2. Tracking & Transparency 

In a B2B payment scenario, the abstracted workflow should be trackable and transparent to both payers and payees to provide more confidence and visibility.

3. FX Rates

Wise likely to have access to multiple bulge bracket bank’s FX desks or other key liquidity sources directly. Most stablecoin startups do not have the access. 

Stablecoin exchange rates need to be better than or at least comparable to what users get on Wise. Apart from a few more exotic FX pairs, this is not the case today.

4. On/Offramp Fees

Instead of getting charged peacemeal fees, there should be a simple all-encompassing fee that aggregates multiple fees charged by various players such as market makers, exchanges, blockchain networks. 

The various fees and clunky UX are the reasons that stablecoin payments currently only offer cheaper and better transfer options in a limited number of use cases and in certain corridors.

Stablecoins already dominate certain niche cross-border corridors with niche client sets but if stablecoins were to capture mainstream B2B payment flow and market share away from neobank’s strongholds, they need to significantly improve the product.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.