Stablecoins will shake up the $900 billion remittance market—setting up a fight between crypto firms and legacy brands like Western Union

Every year, workers around the globe send approximately $900 billion to their families back home and, when it comes to helping them send that money, the market is suddenly up for grabs. The reason is the recent momentum behind stablecoins, which offer an easy way to move money across borders—and for a far cheaper price than legacy transfer systems, whose fees can reach as high as 6%.

Stablecoins, which are backed by reserves designed to peg their value to a fiat currency like the dollar, were long used by experienced crypto traders. Today, millions of ordinary people are using them too via digital wallets. All of this raises an intriguing business question: What companies are best poised to capitalize on the new stablecoin trend?

Will it be a legacy remittance player, like a Western Union or MoneyGram? Or will it be a crypto-native company, like a Kraken or Coinbase, or instead PayPal or one of the growing number of fintechs entering the stablecoin space?

While the emerging stablecoin industry is there for the taking, experts say that both legacy remittance players and newer entrants each possess their own set of advantages and challenges. 

A broken remittances system 

When people send money across borders, fees are steep. The World Bank found in a report earlier this year that the average fee for sending remittances was more than 6%. That cost can be grating over time, especially for low-income immigrants sending money back to developing countries. 

“People are spending extraordinary sums to send money abroad,” said Yesha Yadav, a law professor at Vanderbilt University who specializes in financial regulation. “This impacts how much the most cash-strapped and vulnerable people have in their pocket because some middle person is taking money for no good reason.”

This is where stablecoins could step in. Thanks to blockchain technology, these digital tokens can make international payments faster and at lower costs. The International Monetary Fund recently published an article about how this digital currency could improve payments and global finance. 

Stablecoins have also become a priority in the financial world since President Donald Trump signed the Genius Act in July. The legislation established a regulatory framework for the digital currency. Since then, major remittance players, like Western Union and PayPal, have developed their stablecoin offerings. 

The case for and against incumbents

When it comes to widespread adoption of stablecoins for remittances, traditional players, like Western Union, have the advantage of an existing customer base around the world. This type of company already has established regulation in different countries. That’s according to Nate Svensson, a senior equity research analyst at Deutsche Bank, who says that a company like Western Union has developed compliance internationally for decades, if not centuries. 

“I think [Western Union] has a lot of built in advantages relative to these nascent crypto players,” he said. 

Another analyst, Brett Horn from Morningstar, likewise suggested traditional remittance brands may hold the advantage in the race, citing their long history with clients. When asked about crypto startups who solely focus on remittances using stablecoins, he said, “A lot of times it sounds really good, but I think, frankly, [these startups] are waving away some real difficulties that they might have.”

On the other hand, crypto-native companies have an advantage in their familiarity with the technology and their ability to be nimble. The likes of Western Union, in contrast, may find it hard to move away from long-standing business practices that both the company and their customers know well. When it incorporates stablecoin transfers for remittances alongside its existing fiat transfer system, it essentially has two arms of its business competing with one another. 

“They’re competing with themselves, and that’s just a natural disincentive for things to change,” said Jessica Wachter, a professor of finance at The Wharton School, about legacy remittance players. “A startup would be basically all in on [stablecoins], whereas I’m not sure a [Western Union] would be all in on it.”

Besides legacy financial institutions and crypto startups, another kind of company is vying to win this fight—the bigger crypto companies. Kraken, for example, has an app where users can send and receive funds across more than a hundred countries. 

Regulation for this digital currency is still relatively new, as the Genius Act was only signed into law in July, and the development of the technology is still in its early stages. Yesha Yadav, the law professor at Vanderbilt University, thinks that stablecoins will become even more popular this year, as their consumer protection rules get firmed up.

“I think stablecoins have an enormous runway to expand their footprint,” she said.  

This story was originally featured on Fortune.com