IOSG: The Next Decade of Digital Finance: When Fintech Merges with Encryption

Author｜ Benji Siem @IOSG

introduction

Stripe acquired Bridge for $1.1 billion. Mastercard acquired Zerohash for approximately $2 billion. Robinhood launched its own L2 blockchain. These aren't isolated bets, but signals of a structural shift—the largest fintech giants are embedding blockchain infrastructure, stablecoins, and decentralized finance (DeFi) tracks directly into their core products. Over the past decade, fintech companies have transformed payments, banking, and investing through software-native platforms and massive digital distribution. The next phase has begun: crypto is becoming the backend.

This report analyzes the strategies of ten leading fintech companies in the digital finance sector, focusing on their business models, revenue drivers, and strategies for integrating crypto payments with DeFi infrastructure. A consistent pattern emerges: the most successful companies do not treat crypto as a speculative asset, but rather as backend infrastructure that can improve settlement speed, reduce costs, and expand global financial connectivity. Stablecoins, in particular, are becoming a bridge between the traditional financial system and on-chain markets.

Fintech Industry Insights

The consensus in digital finance: How different players view this opportunity

The digital financial foundation of these ten companies can be summarized as follows:

"Financial services should be borderless, real-time, software-defined, and composable—compliance should be imperceptible to end users."

Different types of players' understanding of opportunity:

Infrastructure players (Visa, Mastercard, Stripe, Adyen)

Basic viewpoint: Transform the underlying channels of capital flow, but do not hold customer relationships.
Opportunity: Every new payment track (stablecoins, A2A, instant payments) expands the market that can be served.
Strengthening access points: Stablecoins reduce settlement friction and enable 24/7 fund management.

Consumer platform types (Nu, Revolut, PayPal, Cash App)

Basic viewpoint: Occupy the main financial entry point for users and cross-sell a package of services.
Opportunity: Integrating banking, payments, investment, and crypto into a single app to increase LTV.
Strengthen entry points: Use encryption as a layer to increase activity and monetization (transaction fees, interest-bearing products, cross-border e-commerce).

Hybrid players (Robinhood, Block, SoFi)

Aggregators bid for aggregation capacity across various markets:

Basic viewpoint: Vertical integration at both the consumer (C-end) product and infrastructure ends.
Opportunity: Capturing profits across multiple levels (C-end activity, B2B infrastructure, asset custody)
Strengthening Entry Points: Bilateral Encryption Strategy (C-end Distribution + Infrastructure Ownership)

Key Trends in Fintech

Based on the analysis of these ten leading companies, several clear patterns have emerged. These are the core arguments of this report, and the subsequent company case studies and integration playbook serve to corroborate them.

Infrastructure first, not speculation

Almost all companies treat crypto as backend infrastructure, not frontend speculation. Visa, Mastercard, Stripe, and Adyen are upgrading their settlement layers with stablecoins while keeping the end-user experience unchanged. Crypto only succeeds when it's "invisible." This is the most consistent pattern among the ten companies and has guided all subsequent integration strategies.

Stablecoins are that "bridge asset".

Every company venturing into crypto is betting on stablecoins as a bridge between TradeFi and crypto:

Visa: USDC settlement on Solana, 130+ stablecoin card program
Mastercard offers four stablecoins: USDC, PYUSD, USDG, and FIUSD, covering multiple blockchains.
Robinhood: Partnering with USDG and sharing revenue
PayPal: Initiated its own PYUSD, internalizing the settlement process.
Stripe: USDC for cross-border merchant withdrawals

Stablecoins can reduce settlement time, decrease FX friction, and enable programmable money management without volatility exposure.

The moat formed by "regulated distribution"

Companies with massive user bases (PayPal 400 million, Revolut 50 million+, Nu 122 million, Cash App 58 million) position themselves as compliant deposit and withdrawal gateways, not protocol builders. Their competitive advantage lies not in technology, but in trust, compliance, and scalable distribution.

DeFi is wholesale, not retail.

No company exposes its native DeFi protocol directly to end-users. Instead, DeFi exists as the backend of wholesale: a source of yield (tokenized government bonds, money markets), liquidity optimization (faster settlement, cheaper cross-border transactions), and product packaging (compliant savings accounts backed by DeFi yields). DeFi has become the infrastructure supporting regulated products, not the user-facing experience. This foundation determines the integration opportunities and investment themes discussed later in this report.

Multi-Rail Strategy

Companies are building infrastructure that is independent of payment methods:

Stripe: "No matter which path I take, I want to own that programmable currency."
Mastercard: A multi-track company covering cards, A2A, real-time payments, and blockchain.
Adyen: "A Global Operating System for Enterprise Payments"

As payment methods become increasingly fragmented (cards, A2A, stablecoins, BNPL), the winners will be companies that can intelligently route between all tracks.

convergence point

The winning strategy can be summarized as: creating a compliant shell for programmable money, capturing value through distribution, trust, and compliance, rather than relying on holding protocols or exposing speculative exposure.

The most competitive companies possess at least one of the following: large-scale distribution (Nu, PayPal, Revolut, Cash App), infrastructure control (Visa, Stripe, Mastercard), or vertical integration (Robinhood, Block, SoFi).

Good mode vs. bad mode

Scalable and powerful business model

The "tollbooth" model of payment networks (Visa, Mastercard)

The marginal cost of each transaction is almost zero; there is a huge fixed cost leverage; and the network effect is almost insurmountable.
It can be scaled virtually indefinitely: every new transaction increases revenue, but the incremental cost is almost zero.
Crypto integration risks: In theory, stablecoins and A2A payments may bypass card organizations, but Visa and Mastercard's response is to position themselves as "networks of networks," sitting on all tracks, including crypto.

Infrastructure-as-a-Service (Stripe, Adyen)

Once embedded in a merchant's technology stack, the switching cost is extremely high; revenue compoundes as the merchant grows; and value-added services (anti-fraud, tax, billing) continuously increase ARPU.
Stripe processed $1.4 trillion in 2024 (approximately 1.3% of global GDP).
Stripe's Bridge/Tempo betting strategy is currently the most aggressive infrastructure approach. If stablecoin payments scale up, Stripe may win over the developer base of crypto-native businesses.

Recurring income + float (Coinbase subscriptions and services, Revolut Premium)

Revenue from stablecoin reserve interest (Coinbase earned $332.5 million from USDC in Q4 2025 alone), staking rewards, and subscription fees is much more stable than trading commissions.
Revenue expands with AUM/AUC, rather than just with trading volume, making it more predictable.

Nubank is a low-cost digital bank targeting underserved markets.

Monthly service cost is only $0.80, while traditional banks charge $5–$10+; monthly active user rate is 83%+; net interest margin is 17.7%.
In markets with underserved banking services, customer acquisition is almost viral; with 122.7 million customers, there is huge potential for cross-selling.

High-risk/poor scalability models

Pure transaction fee dependence

Companies that derive over 90% of their revenue from transaction fees are entirely at the mercy of market cycles. During a crypto bear market, trading volume can drop by 70-90%.
Diversification is important: Coinbase's transaction revenue share has decreased from 96% in 2020 to a projected 59% in 2025. Robinhood now has 11 business lines.

PFOF (Pay-for-Order) Dependence

PFOFs are banned in the EU and continue to be scrutinized in the US. Companies that rely on PFOFs face life-or-death regulatory risks to their core revenue models.
A better path: Shift to subscriptions (Robinhood Gold), interest income, and institutional clients (acquire Bitstamp).

Crypto businesses without recurring/sticky revenue

Crypto exchanges that rely solely on spot trading fees, with no staking, no stablecoin interest, no custody, no DeFi protocol revenue, and no subscriptions, are an extremely pro-cyclical business.
A good crypto business model will have multiple revenue streams (trading + staking + interest + protocol fees + subscriptions).

A "Bitcoin revenue line" with no profit.

Block reported $1.97 billion in Bitcoin revenue in Q3 2025, but the cost of Bitcoin revenue was $1.89 billion, and the gross margin of BTC channel revenue was only about 4%. It boosted revenue but contributed little to gross profit.
Its strategic value lies in ecosystem lock-in (users who buy BTC on the Cash App have higher stickiness), rather than directly profiting from BTC.

Framework: What constitutes a "good" crypto fintech business model?

Fintech Crypto Integration Playbook

The playbook below outlines how ten companies implemented these fundamentals. To understand why these strategies work, please refer back to the "Key Trends" section above.

Stablecoin consolidation (most common and fastest-growing trend)

Visa: USDC settlement within the network
Mastercard: Card partnership with OKX; acquisition of Zerohash
PayPal: Self-issued PYUSD (US$3.6 billion in circulation); supports DeFi usage.
Stripe: Acquired Bridge for $1.1 billion to do stablecoin orchestration; built Tempo L1
Coinbase: Co-issuer/partner of USDC; Stablecoin revenue expected to reach $1.4 billion by 2025.

Make crypto transactions a feature

Robinhood: Native Integration of Crypto Trading and Stocks/Options
Revolut: 200+ tokens available for trading within the app.
Nubank: NuCripto
Block/Cash App: Buy, sell, and transfer Bitcoin

The cost of adding it is very low; it can capture retail demand during a bull market; and it can deepen user stickiness.

Self-built blockchain infrastructure

Coinbase → Base Chain (L2 based on OP Stack)
Stripe → Tempo (L1, in collaboration with Paradigm)
Robinhood → Robinhood Chain (Based on Arbitrum's L2 architecture)

Owning the chain equals owning the economy (Sequencer fees, MEV, ecosystem network effects). An analogy is Visa building its own VisaNet instead of relying on a third-party network.

The full-stack approach to Bitcoin (the Block approach)

Consumer wallet (Cash App) → Merchant acceptance (Square Bitcoin/Lightning) → Self-custody (Bitkey) → Mining (Proto) → Open source development (Spiral).

This is a high-confidence vertical bet: if Bitcoin truly becomes a common payment track, Block will own every layer; if not, it's a large-scale resource investment with uncertain outcomes.

Custody and Institutional Services

Coinbase Prime: Custodian of most Bitcoin/Ethereum spot ETFs in the United States
Mastercard and Visa: Providing a compliance/KYC/AML layer for institutional encryption adoption

Institutional funds require credible and regulated custody—this is a high-barrier-to-entry, high-profit business.

DeFi Deposits and Protocol Participation

PayPal: PYUSD supports DeFi lending/trading on Ethereum.
Coinbase: Base Chain hosts DeFi protocols; USDC is the dominant stablecoin in DeFi.
Revolut & Robinhood: Staking services (ETH, SOL)

Opportunities for integrating crypto payments with DeFi

Upstream (Wholesale / Infrastructure Layer)

Stablecoin settlement network

Use stablecoins for interbank settlements, fund management, and merchant withdrawals. Settlement time is reduced from T+2 to near real-time, lowering correspondent banking costs.

Beneficiaries: Visa, Mastercard, Stripe, Adyen
Example: Visa's obligation to settle VisaNet transactions with USDC on Solana

Tokenized money markets as liquidity

Treating tokenized government bonds (such as Ondo OUSG and Franklin OnChain) as interest-bearing reserves avoids both loss of liquidity and credit risk.

Beneficiaries: PayPal, Nu, Revolut, SoFi
Example: Mastercard MTN supports tokenized government bond assets.

Cross-border remittance track

Replace SWIFT/correspondent banks with stablecoin tracks for B2B and C-end remittances. Instant settlement, lower fees, and better FX exchange rates.

Beneficiaries: Stripe, PayPal (Xoom), Revolut, Nu
Example: Stripe enables USDC withdrawals for merchants worldwide.

Programmable compliance layer

Smart contract-based AML/KYC, transaction monitoring, and sanctions screening. Automated compliance, reduced manual intervention, and real-time risk scoring.

Beneficiaries: All regulated players (especially Visa and Mastercard, which sell value-added services).
Examples: Visa Protect for A2A payments, Mastercard Crypto Secure

Downstream (C-end/Merchant level)

Stablecoin linked card

Cards that spend directly from stablecoin balances are converted to fiat currency at the POS terminal.

Beneficiaries: Visa, Mastercard (basic), Revolut, Cash App (distribution)
Examples: Visa's 130+ Stablecoin Card Program, Mastercard OKX Card

Crypto-collateralized lending

Use crypto assets as collateral for fiat currency loans without triggering taxable events.

Beneficiaries: Robinhood, SoFi, Block, Revolut
Example: Bitcoin mortgage loans offered through Cash App or SoFi

Interest-bearing savings account

High-yield savings products backed by tokenized government bonds or DeFi lending protocols are delivered under a compliant shell.

Beneficiaries: Nu, Revolut, PayPal, SoFi
Example: Revolut's "crypto earn" type products offer returns close to staking yields.

Merchant stablecoin settlement

Allow merchants to settle transactions using stablecoins instead of fiat currencies, reducing FX risk and speeding up withdrawals.

Beneficiaries: Stripe, Adyen, Square, PayPal
Example: Mastercard allows merchants to settle transactions in USDC, PYUSD, or USDG via Nuvei/Circle.

Instant cross-border P2P

Stablecoin-driven remittances offer instant arrival and fees below 1%, putting pressure on Western Union/MoneyGram in Latin America and Asia.

Beneficiaries: PayPal (Xoom), Revolut, Cash App, Nu
Example: Nu enables BRL → USDC → local currency transfers in Latin America.

Differentiation/High-profit niche opportunities

Self-Custody Wallet-as-a-Service

A white-label self-custody solution for institutional and high-net-worth individuals. It allows them to collect custody fees while meeting self-custody compliance requirements.

Beneficiaries: Robinhood (Bitkey), Block, Stripe (via Bridge)
Example: Block's Bitkey hardware wallet

Blockchain-based loyalty programs

Issue points in token form to enable cross-ecosystem redemption. Increase user engagement and create new revenue streams through tokenized rewards.

Beneficiaries: Mastercard, Visa, PayPal

Institutional-oriented DeFi protocol integration (huge potential)

By providing compliant middleware, we offer institutions access to regulated DeFi lending, staking, and liquidity mining.

Beneficiaries: SoFi (Galileo), Stripe (Bridge), Mastercard (MTN)
Example: SoFi Galileo provides white-label crypto staking for banks

Privacy-protected payment

Enables "private and compliant" stablecoin transfers using zero-knowledge proofs. Supports confidential corporate payments while meeting AML compliance requirements.

Beneficiaries: All companies (especially Visa/Mastercard in B2B).

Unbundling-Rebundling: A Structural Perspective

Insights connecting to another report: The Architecture of Value: Structural Evolution of Financial Innovation and Deep Dive Report on Venture Capital Strategies

(https://claude.ai/30284df5d6ec8003aa52f792bb549832?pvs=25)

The winners in Rebundling are infrastructure providers, not consumer platforms.

The most sustainable and scalable fintech business is to let others bundle, not to bundle yourself.

Infrastructure players (Visa, Mastercard, Stripe, Adyen)

Gross profit margin of 90–98%, operating profit margin of 50–62%
Customer acquisition cost is almost zero (users are brought in by developers/banks).
Network effects or developer lock-in are moats
Revenue grows with ecosystem expansion, rather than through direct customer acquisition.

Consumer platforms (Robinhood, Nu, Revolut, PayPal):

Gross profit margin: 30–50%; Operating profit margin: 10–25%
Customer acquisition cost of $200–$450
Profitability requires the use of this method in 3+ products.
More vulnerable to regulatory changes and market cycles

Visa earns 97.8% gross profit from $17 trillion in payments, while Robinhood's crypto transaction revenue is pro-cyclical—this comparison illustrates the fundamental difference between the two.

Three key dependencies that determine the success or failure of rebundling

Dependency 1: Source of Funding (Banking License = Compound Interest-Based Moat)

Winners: Nu (US$19 billion in deposits, 3-4% funding cost, 17.7% net interest margin on loans), SoFi (banking license allows for deposit absorption)
Losers: PayPal (unlicensed, unable to accept deposits), Revolut (UK license delayed, unable to compete in the lending market).

Consumer finance tech companies without banking licenses are either held hostage by their BaaS partners (like Synapse's collapse in 2024) or unable to internalize the interest rate spread between deposits and loans—which is the key to making money through rebundling.

Dependency 2: Cross-selling economy (3+ product barriers)

Single-product users (annual revenue of $50, LTV of $150) lose money at a CAC of $200–$450. Only three-product users (annual revenue of $180, LTV of $540) start to profit.
Success stories: Robinhood (11 products, ARPU of $191, up 82% year-over-year), Revolut (wealth management revenue up 298%), Nu (83% monthly active users across products).
Failure case: PayPal (400 million users, but most only use it for checkout; Venmo/crypto/savings cross-selling is not working)

Dependency 3: Developer/Enterprise Lock-in (Integration Depth)

Stripe's competitive advantage: Once Billing + Tax + Connect + Radar are integrated, dismantling them requires 6+ months of engineering investment. With each additional product, the switching costs compound again.
Visa's genius lies in its "hybrid" approach: 20,000 banks compete for customers (decentralization), but all use Visa's protocol (centralization). Banks cannot leave because the network itself is a product. Zero CAC, 97.8% gross profit, and it collects "tolls" from $17 trillion in transaction volume.

For consumer-facing crypto, structural challenges include: custody responsibilities, squeezed profits (Uniswap 0.3% vs. Coinbase 1–2%), no lock-up (users can withdraw funds from their own custody), and strong procyclicality (Coinbase's revenue decreased by 75% in 2022–2023).

The foundation for crypto's success: Becoming the "Stablecoin's Stripe/Visa"

The common pattern of successful fintech cases is clear: building compliant middleware to abstract away the complexities of blockchain for enterprises and fintech clients.

Investment Theme 1: Stablecoin Orchestration Layers

Stripe's $1.1 billion acquisition of Bridge proves one thing: businesses want stablecoin settlements, but don't want to run their own nodes, manage wallets, or deal with licenses in all 50 states.

The winning product: A single API that handles multiple routing, liquidity optimization, compliance screening, and tax reporting simultaneously. Businesses simply call POST /transfer, and the infrastructure handles everything else.
Economic model: Charge a 0.5-1% take rate on massive transactions, with zero marginal cost per transaction, but extremely high switching costs once integrated. It also boasts a 90%+ gross profit margin, but is applied to the $2 trillion+ stablecoin settlement market.

Investment Theme 2: Vault-as-a-Service ("Fireblocks" Approach)

PayPal, Robinhood, and Nu all hold billions of dollars in crypto assets. Custody requires OCC compliance, MPC/HSM security, $100 million+ in insurance, and disaster recovery.

The opportunity lies in providing the "AWS of crypto hosting"—enterprises access it via API, and it handles key management, policy engines (such as "withdrawals over $100,000 require 3 approvals"), compliance reporting, and OFAC screening.
Every encrypted fintech company needs it.
Zero CAC (B2B Sales Cycle)
High retention (hosting switch = 12+ months of security audit)
Winners: Fireblocks (valued at $8 billion), Anchorage Digital (holds an OCC license), Copper.co

Investment Theme 3: DeFi Middleware / “Vault Curator” Layer

What's currently missing is a "DeFi yield stripe." This stripe would aggregate yields across Aave, Compound, Morpho, and tokenized government bonds (Ondo OUSG), while also abstracting gas fees, generating tax reports (IRS-compliant 1099), and providing an insurance shell and compliance layer.

Opportunities for Vault curators:

Ondo Finance: Tokenized Treasury Bonds, 5% Yield
Backed Finance: Tokenized Corporate Bonds
Maple/Goldfinch: Institutional-grade DeFi lending with underwriters

A concrete example: SoFi has billions of dollars in deposits on its balance sheet, but traditional accounts only offer 0-1% yield. If its B2B platform, Galileo, could provide a "DeFi Yield API" that connects to 5% tokenized government bonds, SoFi could offer customers a 4% APY, keeping 1% for itself, and not putting assets on its balance sheet. This middleware approach, positioned between protocols and regulated fintech, handling compliance and tax reporting, fills a current untapped market.

Framework: Evaluating Fintech Business Models

Overview

Encryption integration and basic alignment among companies

Conclusion

The future of fintech lies in the convergence of traditional financial platforms and programmable financial infrastructure. Blockchain technology is not replacing existing systems, but rather increasingly being integrated as a behind-the-scenes settlement and liquidity layer. Stablecoins, tokenized assets, and on-chain markets bring faster settlements, cheaper cross-border payments, and new financial products, largely invisible to end users.

Ultimately, the companies that will capture the most value in digital finance are those that simultaneously possess large-scale distribution, regulatory trust, and infrastructure control. Whether through payment networks, developer platforms, or consumer finance ecosystems, the winners will be those platforms that abstract away the complexities of finance while orchestrating across multiple payment tracks. As programmable money becomes more widely adopted, fintech companies that successfully integrate traditional finance with blockchain infrastructure will shape the next generation of global financial services.