Introduction

Cross-border remittances remain among the most expensive financial services globally. Even after decades of digitization, payment service providers (PSPs) still face high intermediary fees, slow settlements, and heavy compliance workloads. Much of this stems from the structure of correspondent banking, involving multi-party chains, pre-funded accounts, and fragmented regulations that drive up consumer prices and operational costs.

Meanwhile, stablecoins have shifted from pilots to production-grade settlement rails. With frameworks like MiCA in Europe, the GENIUS Act in the U.S., and Kenya’s new VASP Act, stablecoin flows are no longer experimental; they’re becoming a practical upgrade for PSPs needing faster, cheaper, and more predictable cross-border infrastructure.

At YoguPay, we’ve seen how businesses struggle with global payouts due to regulatory grey areas and the limits of legacy remittance channels. With Kenya’s new VASP Act providing clear oversight for digital-asset settlement, YoguPay’s compliant-grade rails now offer a more convenient, transparent, and reliable alternative to traditional methods; giving PSPs a clear, regulated path to shift from outdated remittance systems to faster, modern settlement infrastructure.

The Current State of Traditional Remittance Rails

Most traditional remittance flows depend on the correspondent banking model. Payment service providers send funds through a chain of intermediary banks, each maintaining Nostro/Vostro accounts (pre-funded cross-border accounts used to settle interbank obligations).

These flows move along SWIFT messaging rails; which, don’t move money themselves despite being standardized. Actual settlement relies on pre-funded nostro balances, treasury management across time zones, and manual reconciliation.

FX conversion also adds complexity, requiring PSPs to either purchase liquidity through banks at pre-agreed margins or maintain their own multi-currency balances. Treasury teams spend significant time managing cut-off times and avoiding liquidity shortages in payment corridors.

Finally, settlement still occurs in batches. A transfer initiated on Friday evening may not settle until Monday or Tuesday depending on time zone misalignment, intermediary capacity, and compliance review.

Cost Structures PSPs Face Today

PSPs operating on traditional remittance rails absorb several layers of cost:

• • Transfer and processing fees: SWIFT messages, intermediary bank charges, and regional clearing fees.
•  
  • Compliance and reconciliation overhead: Manual reviews, error handling, and repeated checks by every bank in the chain.
•  
  • FX margins: Typically between 1% and 3% depending on corridor volume and liquidity conditions.
•  
  • Pre-funding and liquidity costs: Idle capital sitting in nostro accounts reduces working capital efficiency.

These costs add up, especially for service providers running narrow margins and high-volume corridors.

Operational Limitations

Traditional remittance infrastructure introduces friction at every step:

• • Time zones and banking holidays slow settlement and create multi-day delays.
•  
  • High failure rates arise from mismatched beneficiary details, intermediary errors, or compliance flags.
•  
  • Reconciliation gaps often require manual intervention, increasing labor cost and operational risk.

Despite technological upgrades, the core system remains constrained by legacy processes and the limitations of correspondent banking.

The Emergence of Regulated Stablecoin Settlement

What “Regulated Stablecoins” Actually Mean

The stablecoin landscape has matured significantly. Regulated stablecoins are fully fiat-backed, with reserves held in cash or cash-equivalent instruments, frequently audited to allow PSPs to verify solvency and redemption credibility, and issued under formal licensing regimes such as MiCA (EU), GENIUS Act (U.S.), and VASP-style frameworks globally, including Kenya’s VASP Bill, recently enacted as a comprehensive digital asset law.

For PSPs, the key differentiator is regulatory clarity. Unlike algorithmic stablecoins, regulated stablecoins provide predictable redemption, transparent governance, and well-defined compliance expectations.

Technical and Operational Setup

Implementing stablecoin settlement requires several components that create a fully digital settlement pipeline that reduces reliance on correspondent banks.

• • On-off ramps: institutions licensed to convert local currencies to stablecoins and vice versa.
•  
  • Blockchain settlement rails: typically fast, low-cost networks such as Ethereum Layer-2 blockchains or other regulated-issuer supported chains.
•  
  • Custody or wallet models: PSPs choose between custodial (self-managed) or non-custodial (third-party managed) solutions.
•  
  • Treasury automation: managing stablecoin redemption cycles, wallet security, and liquidity buffers.

Why are PSPs Paying Attention Now?

Payment service providers are opting for stablecoin settlement for three main reasons:

• • 24/7/365 availability: No banking holidays, no cut-offs, no weekend delays.
•  
  • Lower infrastructure costs: Network fees are a fraction of SWIFT or intermediary charges.
•  
  • Global reach without correspondent chains: Transfers are direct and final on-chain.

As payment service margins tighten, the appeal of real-time, low-cost settlement becomes increasingly compelling.

Kenya’s VASP Act: A Clear Framework for Digital Asset Operations

Kenya’s recently introduced VASP law has created one of Africa’s most forward-looking regulatory environments for digital assets. The law establishes licensing requirements for exchanges, custodians, wallet providers, and stablecoin issuers, while enforcing AML/KYC controls, capital requirements, and reporting obligations.

By aligning with frameworks like MiCA and FATF, it positions Kenya as a compliant market for stablecoin-based flows. For PSPs, the VASP regulations reduce ambiguity, clarifying which entities can hold or transfer stablecoins and under what conditions, enabling integration of stablecoin settlement with clearer oversight and lower compliance risk.

Cost Comparison: Traditional Remittance vs Stablecoin Flow

Direct Costs

Traditional remittance costs include SWIFT fees, intermediary bank charges, FX spreads, and reconciliation labor. Every transaction involves multiple parties, each extracting a small fee that compounds along the chain. Manual reconciliation further inflates operational overhead, often hidden from the end consumer but significant to payment service providers.

Stablecoin flows, by contrast, typically involve nominal network fees, one-time on/off ramp charges, and lower compliance automation costs. Because settlement occurs on-chain and often in near-real time, operational complexity is reduced, resulting in lower labor and IT expenditure.

Let’s break down the direct cost components for both traditional remittance rails and stablecoin settlement:

Indirect and Hidden Costs

Traditional remittance entails indirect costs that significantly impact PSP balance sheets. Capital locked in pre-funded accounts reduces liquidity flexibility, and delayed settlement negatively affects cash flow management. Furthermore, reconciliation errors can result in lost revenue or penalty fees.

Stablecoin systems carry their own considerations, such as wallet management and selecting reliable counterparties for redemption. However, these are predictable and can be automated, reducing the operational friction and hidden costs that plague traditional corridors.

Total Cost of Ownership for PSPs

When modeling a typical $500 cross-border transaction, cost analysis reveals significant savings with stablecoins. Traditional rails can cost between $25–$40 per transaction, depending on corridor and volume. Stablecoin flows, even accounting for network fees and ramp costs, can reduce total cost of ownership by 40–70% under realistic operational scenarios.

For PSPs, this translates not only into higher margins but also more competitive pricing for end customers, potentially driving higher transaction volumes and market share.

Speed Comparison: Latency, Settlement, and Availability

Remittance Timelines

Transfers via traditional rails are slow. A payment service provider sending funds from the U.S. to Kenya can expect settlement in 1–3 days, with delays arising from batch processing, time-zone mismatches, and manual compliance reviews. Errors, reversals, and liquidity delays further prolong the process.

In contrast, stablecoins offer near-instant transfers; where settlement finality can be achieved in 5–15 seconds depending on the blockchain network. The always-on nature of blockchain eliminates cut-off windows, weekends, and holiday delays, ensuring liquidity flows continuously.

Real-World Scenarios

Scenario A: A PSP sending USD from the U.S. to Kenya can move funds from wallet to wallet in minutes, rather than waiting days for correspondent bank processing.

Scenario B: A PSP managing multi-country merchant payouts can distribute funds simultaneously across multiple destinations with real-time settlement visibility, optimizing working capital and enhancing end-user satisfaction.

FX management in the age of stablecoins means faster settlement improves cash flow, reduces counterparty risk, and provides a superior experience for both consumers and merchants, creating competitive advantage in high-volume corridors.

Compliance and Risk Management Considerations

Remittance Compliance

Traditional remittance relies on post-settlement compliance checks. AML and KYC processes are often conducted at multiple points along the correspondent chain, compounding labor and increasing exposure to errors. Manual processes are time-consuming, and inconsistencies between jurisdictions can result in regulatory scrutiny or penalties.

By comparison, stablecoins enable on-chain analytics and real-time monitoring, allowing service providers to enforce programmatic transaction controls and automate regulatory obligations such as the FATF Travel Rule. This minimizes errors, reduces compliance costs, and improves transparency.

Our YoguPay advantage is that we embed regulatory compliance into the settlement layer itself. Our API infrastructure allows PSPs to automate AML/KYC checks, enforce Travel Rule requirements, and maintain full auditability of every transaction. This reduces human error, lowers operational overhead, and provides regulators with transparent oversight; all while maintaining near-instant settlement for end users.

How the Kenyan VASP Act Supports Stablecoin Settlement

The VASP Act defines licensing pathways for custody, issuance, and transfer of digital assets, reducing counterparty risk. By partnering with regulated stablecoin issuers, PSPs can integrate digital asset flows confidently.

Key benefits include:

• • Clear regulatory guidance on AML/KYC expectations
•  
  • Transparent oversight of stablecoin operations
•  
  • Reduced reputational risk through compliance alignment

For Kenyan PSPs looking to embed crypto into their offerings, this regulatory clarity justifies stablecoin adoption without ambiguity, ensuring alignment with both local and global supervisory expectations.

When PSPs Should (and Shouldn’t) Adopt Stablecoin Flows

High-Value Opportunities

Payment service providers see the strongest gains when stablecoins help remove structural friction in their model. Regulated digital assets tend to be a good fit when:

• • Corridors are high-volume and predictable. Stablecoins work best when remittance facilitators know their weekly liquidity rhythm, making on/off-ramp planning straightforward and reducing volatility around settlement timing.
•  
  • The PSP runs payout-heavy operations. Marketplaces, gig-work platforms, and merchant aggregators benefit from stablecoins’ ability to settle funds quickly and release working capital sooner. This is an immediate improvement to both unit economics and user experience.
•  
  • Local banking infrastructure is slow or fragmented. In markets where cross-border settlement is repeatedly delayed by cut-off windows, intermediary friction, or manual reconciliation, stablecoins offer reliable, always-on movement that bypasses these bottlenecks.

Together, these conditions make stablecoin flows not just operationally cleaner, but strategically accretive to a PSP’s margins and customer satisfaction.

When Stablecoins Are Less Ideal

While regulated stablecoins are generating significant interest, their settlement model is not yet universal. As a result, PSPs should exercise caution when:

• • Operating in jurisdictions with strict capital controls. Redemption, FX conversion, or cross-border movement may face additional regulatory scrutiny, delaying settlement rather than accelerating it.
•  
  • Serving markets with low digital or crypto literacy. Even if the settlement company abstracts the blockchain layer, local partners, banks, agents, and businesses may not fully understand or trust stablecoin flows, creating operational friction during redemption or settlement.
•  
  • Treasury/FX capability is limited internally. Stablecoin settlement requires active liquidity management, predictable redemption planning, and basic multi-currency controls. PSPs lacking this foundation may struggle to run stablecoin corridors efficiently.

These scenarios don’t rule out stablecoins entirely, but they signal that the PSP should move more carefully, or start with a small pilot corridor rather than attempting full migration.

Exploring Hybrid Models

As global regulatory clarity unfolds, many PSPs find the best approach is a mix of traditional and regulated stablecoin rails. A practical hybrid looks like:

• • Traditional rails for customer deposits where trust, onboarding, and familiarity matter most.
•  
  • Stablecoins for cross-border treasury or settlement layers, where costs are highest and delays are most painful.
•  
  • Local payout through mobile money, bank rails, or agent networks, ensuring end users never need to touch or understand stablecoins directly.

For PSPs exploring hybrid models, YoguPay offers a seamless bridge between traditional banking rails and regulated stablecoin settlement. Funds can flow via familiar correspondent networks where needed, while high-cost or delay-prone corridors leverage stablecoins for near-instant settlement. This hybrid strategy preserves user experience while unlocking efficiency gains in high-volume corridors.

Kenya-Specific Advantages Under the VASP Act

The Kenya Virtual Asset Service Providers Act 2025 adds clarity that directly supports PSP adoption. It creates advantages such as:

• • Clear licensing and oversight for digital asset partners, giving PSPs more confidence when choosing custodians, issuers, or on/off-ramp providers.
•  
  • Stronger and more predictable USD/EUR stablecoin corridors, thanks to reserve and audit requirements that reduce counterparty risk.
•  
  • Reduced reliance on slow correspondent banks, enabling faster regional expansion—particularly for PSPs serving East African markets where delays are common.

With legal guardrails in place, Kenyan PSPs and digital assets investors are better positioned than most African markets to adopt stablecoin settlement responsibly and at scale.

Strategic Recommendations for PSPs

PSPs exploring stablecoin settlement should take a structured, low-risk approach. A clear roadmap includes:

1. 1. Run a corridor-level feasibility assessment. Compare real cost drivers such as; FX spreads, pre-funding, and reconciliation labor to a stablecoin-based model to identify where savings are most tangible.
   2. Choose a regulated stablecoin issuer and custodian. Look for transparent reserves, frequent audits, and partners licensed under the VASP regulations or comparable regimes.
   3. Upgrade compliance tools. Add on-chain analytics, Travel Rule automation, and granular wallet controls to maintain or improve AML/KYC safeguards.
   4. Start with a single controlled corridor. A small pilot makes it easier to validate liquidity, redemption, compliance processes, and treasury operations before scaling.
   5. Track regulatory developments across markets. Stablecoin regulation is maturing quickly; PSPs benefit from tying their strategy to jurisdictions that are converging on clear standards.
   6. Move early where benefits are obvious. Early adopters gain pricing flexibility, faster cash cycles, and operational resilience; advantages that compound over time.

Drawing from our operational experience, we advise PSPs to adopt a phased approach. YoguPay supports pilot corridors with controlled liquidity, monitoring, and compliance dashboards to validate cost and speed improvements before scaling.

YoguPay’s Perspective: Faster, Lower-Cost Settlements with Regulated Stablecoins

Regulated stablecoins are transforming cross-border settlement by dramatically reducing costs and accelerating transfer times. YoguPay’s experience shows that by leveraging fully-backed, compliant stablecoins, PSPs can reduce transaction costs, achieve near-instant settlement, and also increase operational efficiency.

How YoguPay Enables These Benefits:

On/off-ramp integration – Seamless conversion between local currency and stablecoins, ensuring liquidity is always available.

Regulated stablecoin rails – Fast, secure, and compliant blockchain networks for direct settlement.

Wallet and custody options – Flexible models that suit PSP preferences, from self-custody to YouPay-managed wallets.

Automated treasury tools – Manage redemption cycles, FX exposures, and liquidity buffers efficiently.

By combining regulatory clarity with operational automation, YoguPay allows PSPs to unlock the speed and cost benefits of regulated stablecoins while remaining fully compliant under local and global VASP regulations.

The New Settlement Playbook

Traditional rails will remain essential for consumer payments and certain regulated corridors. YoguPay, aligned with Kenya’s VASP Act, supports regulated stablecoins and offers PSPs compliant-grade settlement rails that reduce costs, accelerate settlement, and enhance compliance visibility.

By integrating these regulated digital assets, YoguPay helps PSPs adopt hybrid or fully digital settlement policies with confidence. PSPs that embrace this shift early can unlock new business models, reduce operational friction, and deliver faster, cheaper cross-border experiences, while those that delay risk being outpaced by competitors leveraging a more efficient, compliant settlement architecture.

With YoguPay at the center, regulated stablecoin flows are becoming the backbone of the new settlement playbook.