The $11 Trillion Blockchain Revolution that No one Saw Coming.
Since stablecoins have already enabled payment volume of over $11 trillion within the last 12 months, an unspoken revolution has occurred and the foundation of crypto has become financial infrastructure. This thesis was doubled down on by fintech giants this week with Stripe further developing its stablecoin strategy and Revolut positioning to enter the Turkish market, demonstrating that the venture capital firms have to fundamentally rethink the way they assess the role of fintech infrastructure across a play.
A unique early fintech startup window provided by regulatory clarity (with the assistance of the GENIUS Act), institutional adoption, and technological maturation is unprecedented. Stablecoin infrastructure has become one of the most important enablers of the next generation of financial services at Evolve Venture Capital, especially when it comes to startups that want to raise capital with novel mechanisms.
Why Cross-border Payments are being Silently Devoured by Stablecoins.
Conventional correspondent banking transfers up to 23 trillion dollars per year are still riddled with three-day settlements, 3-5% transaction fees, and off-the-record monitoring. Stablecoins transfer the same in a matter of seconds at a fraction of the cost, which is 100x faster and cheaper. In the case of venture capital investment in start ups in the early stage this efficiency opens up whole new models of business.
Think about the consequences: a SaaS start up in Nigeria can now accept payments as a subscription in the US without 5 percent payment processes or even weeks to get the money. A freelancing market place can freelance out the money and payment is released by the project completion across borders. These are not theoretical applications but real applications that are currently billing billions.
The business lesson of founders: it is not only that the stablecoins are cheaper; they have zero working capital drag that kills start-ups. A cash conversion cycle of the startup shrinks by many folds when payment is received immediately as opposed to 30 days and eliminates the necessity to raise capital among startup by conducting dilutive equity rounds.
The Stripe 1 Billion Bridge Takeover: The Strategy of Fintech.
The vertically integrated infrastructure of stablecoins, such as Bridge purchased by Stripe at 1 billion and then its release of an infrastructure called Tempo, is an indication of how the incumbents are incorporating stablecoins into their structures. In the case of startups that are in the initial stage of development, this poses both an opportunity and a threat. The threat: it is no longer possible to compete with the infrastructure of Stripe directly. The opportunity: the creation of specialized applications on the top of this infrastructure is open-ended.
This trend is reflective of cloud computing development. AWS, Azure, and GCP enjoy a monopoly on infrastructure, but thousands of SaaS companies have made billion-dollar businesses on their platform. This will happen in the stablecoins. The example of such companies as BVNK, that have reached a crossing of $30 billion processing volume, demonstrates that special applications of stablecoins are priced high.
Quantum Fintech Curveball.
Although stablecoins are the buzzword in the fintech scene, quantum computing stands as the underdog that will make the existing encryption irrelevant. Venture capital companies are already gearing up towards this shift by being forward-thinking.
The quantum cryptography threat is a reality: quantum computers will crack the RSA encryption in 5-7 years, putting the whole financial system infrastructure under threat. Fintechs and banks need to start quantum safe migrations now. This need is a colossal opportunity for startups that provide cryptographic agility solutions software to allow institutions to change encryption algorithms without having to rewrite underlying systems.
An interesting story that founders in fintech may consider when raising capital is the quantum angle: build infrastructure in case people will transition to security inevitably. Investors are busy questioning What is your quantum readiness plan? during due diligence.
The Streaming credit score: How AI and Stablecoins are building real-time financial identity.
Going Beyond Static Credit: The Emergence of Continuous Underwriting.
Verbal FICO scores are updated every quarter making it a dynamic picture of a borrower risk. However, the contemporary financial existence is real-time gig employees receive their wages daily, freelancers send their bills weekly, and subscription services monthly. The future of lending is to have dynamic credit scoring systems which will keep changing according to real cash flows.
We can already observe its initial incarnations: Indian fintechs use UPI transaction data to grant instant loans. In the case of working capital loans, Southeast Asian lenders analyze the performance of e-commerce sellers. The neobanks in Latin America use utility payment histories as credit building.
With the combination of stablecoins, open banking APIs, and AI, it is possible to create a convergence to stream credit scores, which are assessments of risks that are updated with each transaction. In the case of venture capital financing very young startups this is the holy grail: perfect information and no latency lending models.
New companies that develop these systems have high valuations because they are solving the basic issue of financial inclusion. It is not that the 1.4 billion unbanked adults around the world are rejected by the traditional credit, they just are not seen or noticed by it. Their visibility, bankability, and investability are achieved through streaming credit scores.
Revolut Turkish Gambit: New Market Fintech Strategy.
The case reported by Revolut takeover of Turkish neobank FUPS is another example of how fintech leaders are entering new markets by means of strategic M&A, and not organic growth. To venture capital firms considering fintech investments, this trend is an indication of two important things.
To begin with, new market fintechs are not only copycats, now they are also acquisition targets. The young population of Turkey (median age 32 years), high smartphone penetration, and a complex regulatory environment is a dream of digital banking innovation. FUPS must have overcome these issues, which makes it a better asset to buy than copy.
Second, world fintech supremacy becomes less global and more regional. The companies that are able to create defensible positions in a particular market, be it PicPay, a Brazil-based tech company thinking about a Nasdaq IPO, or Nitro Commerce, an Indian-based startup using AI-based marketing automation, are valued at a premium by acquirers worldwide.
Invisible Finance is the next stage of Embedded Finance.
Invisible finance is made possible by the stablecoin revolution financial services are so fully embedded into the experiences of users that they can no longer see them as financial products. Invisible finance is when an instant payment is made to a gig worker once a delivery is made. In a marketplace, where escrow is automatically released upon passing of code tests, it is invisible finance.
To Founders interested in Capital Raising in Startups, this invisibility is a virtue and not a vice. Conventional financial services incur an average cost of acquisition of around 200 plus per customer account. Invisible finance gains clientele within the current processes, bringing the CAC down to almost zero and leading to a lock-in due to network effects.
Fintech Founder Strategic Recommendations.
- No More Applications, Build Infrastructure: There is already too much in the stablecoin application layer. Players in the infrastructure market, such as compliance tools, developer SDKs, risk scoring APIs, are not as competitive and receive higher valuations.
- Quantum-Proof Your Roadmap: Although quantum computing may not happen in the near future, establishing your startup as quantum-prepared shows technical complexity that is compensated by the venture capital firms.
- Target Regulatory Arbitrage: Regulatory clarity to innovate stablecoins is available in jurisdictions such as UAE, Singapore and Switzerland. Take domiciling operations where the law provides facilitation of innovation, and not a constraint.
- Report Real Think Volume: Within fintech, pilot revenue surpasses expectations. A pitch deck strategy cannot be more valuation leverage than showing even $1M transaction volume per month.
Evolve Venture Capital Financial Advisor Insights.
Being a venture capital firm with a significant deployment of fintech infrastructure, we consider stablecoins as the infrastructure and not as speculative tokens. The portfolio companies that use the stablecoin rails have grown 3x faster than the traditional payment startups with 20% lower burn rates.
In case of founders: Stablecoin infrastructure can be built within a 12-18 months window. Incumbents will have been assembled or developed competitive solutions after that. Pay attention to compliance automation and developer experience- these are the problems which are not solved yet.
To investors: Assess the prospects in fintech in the terms of network effects and regulatory moats. Companies that are in the business of consuming real transaction volume with definite access to profitability should receive premium valuations, independent of market conditions.
Stablecoins, AI, and quantum computing coming together will transform finance in a way that the internet transformed it twenty years ago. New generation in financial services will be characterized by the entrepreneur who identifies it, or the individual who invests in them.
Contact Information:
- Website: www.evolvevcap.com
- Email: contact@evolvevcap.com
- Phone: +65 8181 4097
