TL:DR
Why Fintechs Need to Understand the Infrastructure Layers
Cross-border money still moves slowly for most fintechs. A payment to a supplier abroad often passes through several correspondent banks, and each one adds a fee and a cut-off time. To pay out quickly, many fintechs prefund accounts in every market they serve and leave that cash sitting idle.
The cost is easy to see at the consumer end. The World Bank puts the global average cost of sending $200 at 6.36 percent of the amount sent in Q3 2025. Business payments run on the same correspondent structure, with the same stacked fees and waiting time.
Stablecoin settlement changes the middle of that journey, and it is no longer small. BCG and Allium Labs found that real-economy stablecoin payments reached $350 to 550 billion in 2025. But a stablecoin never moves on its own. It moves on a blockchain, inside a network, through licensed firms at each end.
Each of those layers affects cost, speed and risk in a different way. A fintech that knows what each layer does can ask sharper questions of partners and avoid building things it does not need. If you want a refresher on the asset itself, start with how stablecoins work and the main types. This guide covers the rails underneath.
What a Layer 1 Blockchain Does
A layer 1 is a base blockchain. It records transactions, puts them in order and makes them final without relying on another chain. Ethereum's own documentation describes layer 1 chains such as Ethereum and Bitcoin as the foundation that other projects build on. Solana and Tron are also layer 1 chains, and both carry large stablecoin volumes.
Three parts of a layer 1 matter most for payments.
Validators confirm transactions. They are the operators who check each transaction and add it to the chain. On most public chains, anyone who meets the technical rules can become a validator. Some newer payment chains use a known, permissioned set of validators instead.
Finality is the moment a payment is settled. After finality, a transaction cannot be reversed. Some chains reach it in under a second. Others need a series of confirmations that can take minutes. For a treasury team, finality is the point at which funds are truly available on the other side.
Network fees are paid on every transaction. These fees are often called gas. On most general-purpose chains, gas is paid in the chain's own token, and that token's price moves. This makes costs harder to predict and means someone has to hold an asset a finance team may not want on its balance sheet.
Most fintechs never see these fees line by line. Their payment provider or network bundles them into a single transaction price. Even so, the design of the base chain sets the outer limits on speed, cost and reliability for everything built on top of it.
The same stablecoin can live on many layer 1 chains. USDC, for example, is issued natively on a long list of chains. A dollar of USDC on one chain and a dollar of USDC on another are worth the same, but they sit in different places and cannot be spent on the other chain without a transfer between them. This is why the question of which chain a partner settles on is a practical one, not a technical detail.
What a Layer 2 Builds On
A layer 2 is a separate blockchain that runs on top of a layer 1 and relies on it for security. On Ethereum, the most common type is the rollup. As Ethereum's layer 2 overview puts it in plainer terms, a rollup bundles hundreds of transactions into one transaction on the base chain. The fee for that one transaction is shared across everyone in the bundle, so each payment costs less. The rollup processes transactions itself but posts the transaction data back to Ethereum, and that is how it inherits Ethereum's security.
Base and Arbitrum are two well-known layer 2 networks. FXC Intelligence uses them as examples of secondary networks built on a layer 1 to add features that the base chain lacks.
For payments, layer 2 networks bring lower fees and quicker confirmations than their base chain. They also bring trade-offs that a fintech should understand before relying on them.
Liquidity splits across networks. The same stablecoin can sit in separate pools on many layer 2 networks. A partner may hold funds on one network while the recipient's provider expects them on another.
Moving between networks adds steps. Every transfer between a layer 2 and another chain is an extra operation, and each extra operation is another place where something can go wrong.
Confirmation and final settlement can differ. Depending on the design, the confirmation a user sees on a layer 2 can arrive before settlement is fully locked in on the base chain.
For a fintech, the practical question is rarely layer 1 or layer 2. It is which chains your partners support, and whether they can move funds between them without you having to manage it.
General-Purpose Chains vs Chains Built for Stablecoin Payments
General-purpose chains were designed to run any kind of application. Payments are one use among many, so a payment competes for space with trading and other activity, and fees rise and fall with demand.
Circle has described the pushback it hears from payment companies about these chains. Finance teams want fees they can plan around. Treasury teams cannot hold a volatile token just to pay network fees. Sensitive payment data should not be fully visible on public rails. And regulated firms want to know who to call when something breaks. None of these are problems a general-purpose chain was designed to solve.
A newer group of layer 1 chains is built around stablecoin payments from the start. Arc, from USDC issuer Circle, is the most prominent example. In its introduction of Arc, Circle sets out the main design choices. USDC is the native gas token, so network fees are priced in dollars rather than in a token whose value moves. Settlement finality is deterministic and arrives in under a second. A built-in FX engine supports round-the-clock onchain conversion between stablecoins. Balances and transactions can be shielded on an opt-in basis. And Arc is compatible with the Ethereum Virtual Machine, so developers can use tools they already know.
Circle positions Arc as a settlement layer that connects to its other products rather than a standalone chain. For institutions already connected to CPN, Circle describes Arc as an onchain settlement option, and the FX engine is intended to support automated conversion into local currencies over time. Circle has also said the core Arc software will be released under a permissive open-source licence.
Arc moved from a private phase to a public mainnet on 16 September 2026. Ahead of launch, Circle named its founding validator cohort, which includes BlackRock, DTCC, Mastercard, Standard Chartered and Visa, with more than 100 institutional and ecosystem builders already on the private network. Circle's mainnet launch release states that Arc is operated by a permissioned validator set. That is a deliberate choice: known, regulated operators in return for less openness than a chain anyone can validate.
Arc is not the only chain aimed at financial institutions. FXC Intelligence notes that Stripe and Paradigm launched the mainnet of Tempo, a payments-first layer 1, in March 2026. For fintechs, this means more choice and more fragmentation at the same time.
What does not change is the role of the chain. Even a chain built for payments is only the settlement rail. It does not verify your customer, screen the payment against sanctions lists, or deliver local currency to a bank account. That work happens in the layers above it.
Payment Networks Are Not Blockchains: Where CPN Sits
This is where most of the confusion lies. Circle Payments Network (CPN) is often described as a blockchain network, but it is not a chain. In its CPN mainnet announcement, Circle calls it a compliance-first payments coordination protocol. Financial institutions use it to exchange payment instructions and then settle on public blockchains.
According to the Circle Payments Network page, the network connects banks, payment service providers, virtual asset service providers and enterprises. Only institutions that meet its eligibility requirements can join, and eligibility reviews follow each jurisdiction's rules. Circle writes the network rules and defines the protocol, but it is not a money transmitter and does not move funds directly.
A CPN payment has two sides. The Originating Financial Institution (OFI) acts for the sender. It verifies the customer, runs the required checks, converts local currency into stablecoins and sends them. The Beneficiary Financial Institution (BFI) receives the stablecoins, converts them into local currency and pays the recipient. Settlement currently runs in USDC and EURC, on chains that include Arc, Ethereum, Polygon, Solana and other EVM-compatible chains. Each institution chooses which chains it operates on.
The network adds three things a chain cannot provide on its own.
A directory of vetted counterparties. An OFI can reach BFIs across many markets through one integration, without signing a bilateral agreement with each one.
Compliance data that travels with the payment. CPN enforces the Travel Rule in line with FATF guidance, and participants can set their own criteria for which transactions and counterparties they accept.
Operating rules and service levels. The CPN Rules set expectations for uptime, transaction speed, dispute resolution and information sharing.
Circle also points to a working capital benefit. Because settlement is near-instant, participants do not need to prefund local nostro accounts in every market.
CPN supports several kinds of payment. Circle lists B2B supplier payments, cross-border remittances, treasury and cash consolidation, recurring enterprise payments, and payroll and mass disbursements among the use cases. Circle also notes that much of the demand for dollar-backed stablecoins comes from outside the United States, in markets where getting access to dollars is slow and expensive.
Institutions can connect in different ways. Circle's CPN product line covers fiat payments, stablecoin payments and a fully managed option. With CPN Managed Payments, Circle checks participants' licensing and compliance status, and partners can use stablecoin settlement without handling stablecoins directly. The platform works across traditional payment rails and more than 20 blockchains.
The Full Stack, From Issuer to Local Bank Account
Put the pieces together and a stablecoin payment runs through five parts, each with a different owner. The fiat in, stablecoin across, fiat out model shows how the money flows. The stack below shows who is responsible for what along the way.
The issuer sits at the top. It creates and redeems the stablecoin and holds the reserves behind it. USDC, issued by Circle, is the main example for regulated business payments.
The settlement chain comes next. This is the layer 1 or layer 2 where the token actually moves and where finality happens.
The network layer coordinates institutions. It provides the rules, the directory of counterparties, compliance messaging and routing. CPN is the clearest example.
Licensed providers handle the money going in and out. These are the OFIs and BFIs. They onboard customers, run KYB and AML checks, and convert between local currency and stablecoins.
Local rails deliver the final payment. Domestic systems carry funds into the recipient's bank account or wallet.
Most fintechs only touch the bottom two layers directly. The top three are chosen for them by their partners. This matters when you compare providers. A provider promising settlement in seconds may be describing the chain, while the real delay sits in the local payout.
One Payment Through the Stack: A Worked Example
A simple scenario shows how the layers divide the work. A B2B marketplace based in North America needs to pay a supplier in Hong Kong for a restocking order. The marketplace wants the supplier paid the same day so the next shipment is not delayed.
The sending institution. The marketplace pays its payment provider in US dollars. The provider acts as the originating institution. It has already completed KYB on the marketplace, and it screens this payment against sanctions lists before anything moves.
The network. The provider submits the payment through the network. The network identifies an eligible receiving institution licensed to pay out in Hong Kong, and sends the payment details and compliance data to it. The two institutions do not need a bilateral agreement, because both follow the same network rules.
The chain. The originating provider converts the dollars into USDC and sends them on a chain both institutions support. Finality arrives in seconds or minutes, depending on the chain. This step runs the same way at 3 a.m. on a Sunday as it does on a Tuesday afternoon.
The issuer. Behind the scenes, the stablecoin is backed by reserves held by its issuer. That is what lets the receiving institution treat one USDC as one US dollar when it converts.
The local rail. The receiving institution converts USDC into Hong Kong dollars and pays the supplier's bank account over the domestic system.
Now look at where things can slow down. The chain step is rarely the problem. Delays tend to come from the ends: a KYB gap at onboarding, a compliance question on the payment, or a local payout that misses a bank cut-off. A B2C version of the same flow, such as a remittance app paying a family member's wallet, faces the same pattern. The value of the middle layers depends on how well the licensed institutions at each end do their jobs.
What Each Layer Changes for a Fintech
The layers matter because each one controls a different part of the experience your customers get.
Settlement time depends on two layers, not one. The chain decides how fast a transfer becomes final. The local rail decides when the recipient actually sees the money. A payment can settle onchain in seconds and still wait for a domestic cut-off time on the other side. Always ask partners for end-to-end payout time, not chain time.
Prefunding depends on the network. In the correspondent model, fintechs park cash in every payout market. With network settlement, funds can move when a payment is needed. For a fintech paying out daily across many markets, less prefunding means more cash available for growth. The same logic applies inside a company's own finance team, which is why stablecoin treasury management is getting board-level attention.
Compliance depends on the network rules and your partners. The network decides who you can transact with and what data travels with each payment. Your own obligations to know your customers and screen transactions do not go away.
Reach depends on who is on the other side. One integration into a network can open many corridors, but only where the network has licensed institutions ready to pay out. A corridor with no active BFI is not a corridor you can use.
Cost is spread across the whole stack. Chain fees are usually the smallest part. Conversion at each end is usually the largest. The full cost stack of stablecoin payments is covered in a separate guide. The headline result is encouraging: in the EY-Parthenon stablecoin survey, 41 percent of corporates already using stablecoins reported savings of at least 10 percent on cross-border B2B payments.
The weight of each factor depends on who your customers are. A B2B platform paying suppliers across Asia usually cares most about prefunding and payout time, because both affect its customers' cash flow and restocking cycles. A B2C remittance or wallet app usually cares most about the cost per transfer against the 6.36 percent consumer benchmark, and about paying out on weekends and holidays when banks are closed.
Trade-Offs and Open Questions
The new layers solve real problems, but they are not free of risk. Fintechs evaluating stablecoin rails should weigh both sides.
Fragmentation is growing. USDC runs on many chains, and new payment chains keep launching. More chains mean more places for liquidity to split. A network that routes across chains reduces this problem but does not remove it.
Payout depth varies by market. The chain and the network work the same way everywhere. Converting stablecoins into local currency does not. Thin conversion markets can erase the savings, a risk that is sharpest in emerging market corridors.
Permissioned validators involve a trade. Chains run by known institutions can offer stronger accountability and predictable performance. They are also less open than chains anyone can help secure. Neither model is right for every use case.
Rules differ by jurisdiction. Stablecoin regulation is moving quickly and is not the same in every market. The licences held by your partners, and which legal entity provides which service, matter as much as the technology.
Final means final. Once a transfer reaches finality onchain, it cannot be pulled back. Errors have to be fixed with a new payment, so screening and verification before sending matter more, not less.
How Fintechs Plug Into Stablecoin Rails
There are three main ways to use this infrastructure. They differ in how much control you get and how much work you take on.
Integrate with chains directly. You hold stablecoins, run wallets, manage custody and choose chains yourself. This gives the most control. It also means you need the licences, the custody setup, the compliance program and the operations team to support it, in every market you serve.
Join a network as a member. You become an OFI, a BFI or both on a network such as CPN. You get access to many counterparties through one set of rules. You must meet the network's eligibility and licensing requirements, and you still run your own conversion and compliance.
Work through a licensed member. You use a provider that already holds the licences and the network access. You can often stay in fiat end to end, while the provider handles conversion and settlement. This is the fastest route to market, and your coverage depends on your partner's.
Most institutions are choosing the third path, at least to start. EY-Parthenon found that 79 percent of financial institutions plan to use a third-party technology partner for stablecoin infrastructure rather than build it in-house. Providers of payment infrastructure for fintechs should be able to answer the questions below clearly, and back their answers with a public licensing footprint.
Where Tazapay Fits
Tazapay is a partner on Circle Payments Network, focused on cross-border payments into Hong Kong and wider Asia-Pacific commerce. Circle's CPN mainnet announcement describes Tazapay as a licensed Beneficiary Financial Institution that supports compliant fiat disbursements into Hong Kong, helping businesses in Latin America and North America settle payments into Asia.
That role sits in the bottom two parts of the stack: receiving settlement and delivering local currency. It targets the problems small and mid-sized businesses feel most when they trade across borders. Payments that rely on several correspondent bank relationships are harder to manage. Fees stack up at each hop. And slow fund movement disrupts restocking and payouts. For online sellers and dropshippers, getting paid faster means less time waiting on inventory and a quicker response to demand.
For fintechs building their own offering, Tazapay provides stablecoin payments through Tazapay Canada Corp., alongside local payouts across key markets in Asia-Pacific and beyond.
Sources
- World Bank, Remittance Prices Worldwide, Issue 54 (September 2025). https://remittanceprices.worldbank.org/sites/default/files/2026-04/RPW_main_report_and_annex_Q325.pdf
- BCG and Allium Labs, Stablecoin Payments: The Truth Behind the Numbers (January 2026). https://www.bcg.com/assets/2026/white-paper-stablecoin-payments-truth-behind-numbers.pdf
- ethereum.org, What is layer 2? (2026). https://ethereum.org/en/layer-2/learn/
- FXC Intelligence, How Circle's Arc is trying to capture payments share (September 2026). https://www.fxcintel.com/research/reports/ct-arc-stablecoin-blockchains
- Circle, Introducing Arc: An Open Layer-1 Blockchain Purpose-Built for Stablecoin Finance (August 2025, updated May 2026). https://www.circle.com/blog/introducing-arc-an-open-layer-1-blockchain-purpose-built-for-stablecoin-finance
- Circle, Circle Announces Founding Validator Cohort and Major Integrations for Arc (August 2026). https://www.circle.com/pressroom/circle-announces-founding-validator-cohort-and-major-integrations-for-arc-ahead-of-september-16-mainnet-launch
- Circle via Business Wire, Circle Launches Arc Mainnet (September 2026). https://www.businesswire.com/news/home/20260916108863/en/Circle-Launches-Arc-Mainnet-an-Economic-Operating-System-for-the-Internet
- Circle, Circle Payments Network (CPN) Mainnet is Here (May 2025). https://www.circle.com/blog/circle-payments-network-cpn-mainnet-is-here-advancing-mainstream-stablecoin-payments-globally
- Circle, Circle Payments Network (2026). https://www.circle.com/cpn
- EY-Parthenon, Stablecoin Survey (June 2025). https://www.ey.com/en_us/insights/financial-services/cost-savings-and-speed-drive-stablecoin-adoption
Stablecoin services are provided by Tazapay Canada Corp., a registered Money Services Business (MSB) under FINTRAC-CANAFE (Registration No. M21439799). Tazapay's stablecoin services are limited to facilitating payments and conversions (onramp/offramp). Tazapay does not provide financial, investment, or advisory services related to stablecoins. Tazapay Pte. Ltd. (Singapore) does not provide Digital Payment Token services under the Payment Services Act 2019.
