Multicoin Capital: The Era of Financial Technology 4.0 Has Arrived

Source: Multicoin Capital

Compiled by: Zhou, ChainCatcher

Over the past two decades, fintech has changed the way people access financial products, but it has not changed the actual flow of funds. Innovation has mainly focused on more streamlined interfaces, smoother registration processes, and more efficient distribution channels, while the core financial infrastructure has remained largely unchanged. For most of this time, this technology stack has simply been resold rather than rebuilt.

Overall, the development of fintech can be divided into four stages:

Fintech 1.0: Digital Issuance (2000-2010)

The earliest wave of fintech made financial services more accessible, but efficiency did not significantly improve. Companies like PayPal, E*TRADE, and Mint digitized existing products by combining traditional systems established decades ago (such as ACH, SWIFT, and card networks) with internet interfaces.

Settlements were slow, compliance processes relied on manual intervention, and payments were strictly made according to a set schedule. Although the financial industry became online, the fundamental way funds flowed did not change. What changed was who could use financial products, not how those products operated.

Fintech 2.0: The New Banking Era (2010-2020)

The next breakthrough came from smartphones and social media. Chime targeted hourly workers who could access their wages early; SoFi focused on providing student loan refinancing for aspiring graduates; Revolut and Nubank reached underserved consumers globally with user-friendly experiences.

Each company told a more compelling story for specific audiences, but they were all selling essentially the same products: checking accounts and debit cards operating on the same traditional systems. They relied on sponsoring banks, card organizations, and ACH systems.

These companies succeeded not because they built new channels, but because they reached customers better. Branding, user guidance, and customer acquisition were their advantages. Fintech companies of this era became tech-savvy distribution enterprises attached to banks.

Fintech 3.0: Embedded Finance (2020-2024)

Around 2020, embedded finance began to flourish. APIs enabled almost all software companies to offer financial products: Marqeta allowed companies to issue debit cards via API; Synapse, Unit, and Treasury Prime provided banking as a service. Soon, almost all applications could offer payment, debit card, or loan services.

But beneath the abstraction layer, the essence did not change. Banking as a Service (BaaS) providers still relied on those previous banks, compliance frameworks, and payment channels. The abstraction layer was elevated from banks to APIs, but economic benefits and control still flowed to the existing systems.

The Commoditization of Fintech

By the early 2020s, the drawbacks of this model were evident everywhere. Almost all large new banks relied on a few sponsoring banks and BaaS providers.

Source: Embedded

As companies engaged in fierce competition through performance marketing, customer acquisition costs soared. Profit margins were compressed, fraud and compliance costs surged, and infrastructure became almost indistinguishable, leading to a marketing arms race where many fintech companies tried to stand out through card colors, signup bonuses, and cashback gimmicks.

Meanwhile, risk and value acquisition concentrated at the banking level. Large financial institutions regulated by the Office of the Comptroller of the Currency (OCC), such as JPMorgan Chase and Bank of America, retained core privileges: accepting deposits, issuing loans, and accessing federal payment systems like ACH and Fedwire, while fintech companies like Chime, Revolut, and Affirm lacked these privileges and had to rely on licensed banks for these services. Banks earned interest and platform fees; fintech companies earned transaction fees.

With the surge in fintech projects, regulators increasingly scrutinized the sponsoring banks behind these projects. The issuance of regulatory orders and heightened regulatory requirements forced banks to invest heavily in compliance, risk management, and oversight of third-party projects. For example, Cross River Bank reached a regulatory order with the Federal Deposit Insurance Corporation (FDIC), Green Dot Bank faced enforcement action from the Federal Reserve, and the Federal Reserve issued a cease-and-desist order to Evolve.

Banks responded by tightening customer onboarding processes, limiting the number of supported projects, and slowing product iteration speeds. Models that once allowed experimental attempts now increasingly required economies of scale to offset compliance burdens. The pace of fintech development slowed, costs rose, and there was a greater tendency to develop generic products rather than specialized ones.

We believe there are three main reasons why innovation has consistently been at the forefront over the past 20 years.

• 1. The infrastructure for fund flow is monopolized and closed. Visa, Mastercard, and the Fed's ACH network leave no room for competition.
• 2. Startups require substantial funding to develop finance-centric products. Launching a regulated banking application requires millions of dollars for compliance, anti-fraud, capital operations, and more.
• 3. Regulation limits direct participation. Only licensed institutions can hold funds or transfer money through core channels.

Data Source: Statista

Given these constraints, it makes more sense to develop products than to fight against established rules. The result is that most fintech companies are merely refining bank APIs. Despite two decades of innovation, the industry has seen few truly new financial technologies emerge. For a long time, there have been no viable alternatives.

The trajectory of cryptocurrency development is in stark contrast. Developers initially focused on foundational functionalities, with features like automated market makers, bond curves, perpetual contracts, liquidity vaults, and on-chain credit gradually evolving from the ground up. The financial logic itself also achieved programmability for the first time.

Fintech 4.0: Stablecoins and Permissionless Finance

Although the first three eras of fintech saw numerous innovations, their underlying mechanisms changed little. Whether products are delivered through banks, neobanks, or embedded APIs, the flow of funds still follows a closed, permissioned path controlled by intermediaries.

Stablecoins break this model. Stablecoins do not layer software on top of the banking system; instead, they directly replace key banking functions: developers interact with an open, programmable network; payments settle on-chain; functions like custody, lending, and compliance shift from contractual relationships to the software layer.

BaaS reduces friction but does not change the economic model. Fintech companies still need to pay compliance fees to sponsoring banks, settlement fees to card organizations, and access fees to intermediaries. Infrastructure remains expensive and requires licensing.

Stablecoins completely eliminate the need to rent access. Developers no longer need to call bank APIs but can write code directly to open networks; settlements occur directly on-chain; fees belong to the protocol rather than intermediaries. We believe that building costs will significantly decrease: from millions required to build through banks or hundreds of thousands through BaaS, to just thousands using permissionless smart contracts on-chain.

This shift has already manifested at scale. The market capitalization of stablecoins has grown from nearly zero to about $300 billion in less than a decade, and their actual economic transaction volume even exceeds that of traditional payment networks like PayPal and Visa, even without accounting for internal exchange transfers and MEV transactions. Non-bank, non-card payment channels have achieved true global scale for the first time.

Source: Artemis

To understand why this shift is so important in practice, we need to look at how today's fintech companies are built. A typical fintech company relies on a multitude of vendors:

• 1. User Interface/User Experience
• 2. Banking/Custody Layer - Evolve, Cross River, Synapse, Treasury Prime
• 3. Payment Channels - ACH, Wire, SWIFT, Visa, Mastercard
• 4. Identity and Compliance - Ally, Persona, Sardine
• 5. Fraud Prevention - SentiLink, Socure, Feedzai
• 6. Underwriting/Credit Infrastructure - Plaid, Argyle, Pinwheel
• 7. Risk and Financial Infrastructure - Alloy, Unit21
• 8. Capital Markets - Prime Trust, DriveWealth
• 9. Data Aggregation - Plaid, MX
• 10. Compliance/Reporting - Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets Control (OFAC) checks

Launching fintech products within this architecture means managing contracts, audits, incentive structures, and failure modes with dozens of counterparties, each layer adding costs and delays, with many teams spending as much time coordinating infrastructure as they do on product development.

The native systems of stablecoins simplify this complexity, merging functionalities that originally required six vendors into a single set of on-chain primitives.

In the world of stablecoins and permissionless finance, banks and custody services will be replaced by Altitude; payment channels will be replaced by stablecoins; identity verification and compliance are certainly important, but we believe they can exist on-chain and maintain confidentiality and security through technologies like zkMe; underwriting and credit infrastructure will be thoroughly reformed and moved on-chain; once all assets are tokenized, capital market companies will become irrelevant; data aggregation will be replaced by on-chain data and selective transparency, such as using fully homomorphic encryption (FHE) technology; compliance and OFAC compliance will be handled at the wallet layer (for example, if Alice's wallet is on the sanctions list, she will not be able to interact with the protocol).

This is the true difference of Fintech 4.0: the underlying architecture of finance has finally changed, and people no longer need to develop another application that secretly requests bank authorization in the background, but can directly replace most banking operations with stablecoins and open payment channels. Developers are no longer tenants; they own the land.

Opportunities for Specialized Stablecoin Fintech Companies

The most direct impact of this shift is clear: the number of fintech companies will increase significantly. When custody, lending, and fund transfers are almost free and instant, starting a fintech company is akin to launching a SaaS product. In a stablecoin-native environment, there is no need to interface with issuing institutions, wait for days for clearing windows, or undergo cumbersome KYC checks, which will not become stumbling blocks to your growth.

We believe that the fixed costs of launching finance-centric fintech products will also drop from millions of dollars to thousands of dollars. Once infrastructure, customer acquisition costs (CAC), and compliance barriers disappear, startups will be able to begin providing profitable services to smaller, more specific social groups through what we call specialized stablecoin fintech models.

There is a clear historical parallel here. The previous generation of fintech companies initially served specific customer groups: SoFi provided student loan refinancing, Chime offered early wage access, Greenlight provided debit card services for teens, and Brex served entrepreneurs who could not access traditional business credit. However, this specialization ultimately failed to become a sustainable operating model, as transaction fees limited revenue and compliance costs rose. Dependence on sponsoring banks forced companies to expand their business scope beyond their initial niche. To survive, teams were compelled to horizontally expand, and the products ultimately launched were not driven by user demand but by the need for infrastructure to scale to maintain operations.

As cryptocurrency infrastructure and permissionless financial APIs significantly lower startup costs, a new generation of stablecoin neobanks will emerge, targeting specific user groups like early fintech innovators. With significantly reduced operating costs, these new banks can focus on more segmented, specialized markets and maintain their specialization: for example, Sharia-compliant financial services, lifestyles of cryptocurrency enthusiasts, or athletes with unique income and spending patterns.

The second-order effects are even more pronounced: specialization can enhance unit economics. Customer acquisition costs (CAC) decrease, cross-selling becomes easier, and lifetime value (LTV) per customer increases. Specialized fintech companies can precisely match products and marketing with high-conversion target groups and gain more word-of-mouth through serving specific populations. Compared to the previous generation of fintech companies, these businesses have lower operating costs but clearer profitability per customer.

When anyone can launch a fintech company in a matter of weeks, the question shifts from "Who can reach customers?" to "Who truly understands them?"

Exploring the Design Space of Specialized Fintech

The most attractive opportunities often emerge where traditional systems collapse or disintegrate.

Take adult content creators and performers