How stablecoins shake up the financial 'super app' battle

Gabby Jones/Bloomberg

Stablecoins are still a small part of the overall currency market, but there's upside potential that could make them an unavoidable factor in financial services, including the elusive quest to design banking apps that dominate consumer lifestyles.

PayPal and Circle, two U.S. firms that are trying to build what are called financial super apps, are making stablecoins a major piece of how users link to other functions. Both companies made recent deals to expand usage of their own stablecoins while easing access to other financial services.

That means stablecoins could be a future star for super apps. Stablecoins, which are backed by reserves of traditional currency and are designed to be less volatile than other cryptocurrencies, are growing rapidly, recently passing $240 billion in market capitalization for the first time. Stablecoins are on pace to reach as much as $7 trillion in market capitalization in five years, according to Citigroup research issued in early April.

Citing a favorable regulatory environment and the likelihood that stablecoin issuers will become major holders of U.S. Treasuries, Citi said stablecoins are at an inflection point, adding that "2025 has the potential to be blockchain's 'ChatGPT' moment," a reference to 2023, when the introduction of ChatGPT caused a rush of investment among banks and other industries.

Stablecoins for a Swiss Army knife

PayPal and Circle are both positioning themselves to capitalize on the increasing popularity of stablecoins as a means to power their super apps. 

PayPal recently expanded its partnership with cryptocurrency exchange Coinbase to power free conversions between PayPal's PYUSD stablecoin and traditional money. Coinbase will offer PYUSD to PayPal's merchant network, making it easier for the stablecoin to be used at the point of sale. 

It also can drive PayPal's super app strategy, a long-standing initiative to enable a mobile app to shop at millions of merchants, make payments, access a debit card, use installment credit, pay bills, invest, make P2P transfers, receive paychecks and dozens of other services. The addition of the Xoom remittance and Venmo transfer app, PayPal's PYUSD and support for stablecoin and cryptocurrency investments at Venmo and PayPal add to that super-app potential. 

"PayPal's original secret sauce was always float, the idle balances left in user accounts. This [stablecoin] move revives that playbook with a modern twist," payments consultant Richard Crone told American Banker, noting the 3.7% annualized rewards on PYUSD balances are a way to incentivize users to park their funds in PayPal and Venmo wallets. PayPal can make money off of the rewards offer if it can entice enough adoption for payments, which carry a 2.9% + $0.30 average transaction fee and other service charges. 

Unlike a money market fund, for example, these balances remain fully liquid for transactions within PayPal's ecosystem, Crone said. 

"This model sets a new bar for prepaid instruments: a gift card that earns interest," Crone said, adding PayPal may force competitors like Apple, Block, and even big-box retailers such as Walmart to explore similar mechanics for prepaid cards and wallets. These firms have all added financial services in recent years to pursue a super app. Walmart, for example, is building a financial products menu through a fintech partnership with Ribbitt Capital.

Block uses its Cash App as a way to power cryptocurrency investments and to provide technology rails for its other products for both consumers and merchants. And Apple's wallet, payment app and card also enable a variety of financial services, as well as the ability to use Apple Pay to buy things.

The stablecoin isn't the only enabler — but it adds programmability, blockchain portability and regulatory clarity, Crone said. "The real innovation is combining yield with spendability in a closed-loop, scalable ecosystem," he said.

Do consumers want a super app?

PayPal did not comment for this article. During PayPal's earnings call on Tuesday, CEO Alex Chriss said the company's development of agentic AI for customer service and improvements in marketing, along with expanding use of cryptocurrency, will improve the customer experience for all PayPal products. 

"The Coinbase partnership will increase the usage of digital currencies for everyday purchases," Chriss said. 

Payments

Circle pushes stablecoins as a global real-time payment bridge

April 24, 2025 11:30 AM

At nearly the same time as PayPal's Coinbase announcement, Circle launched the Circle Payments Network, which connects financial institutions, fintechs, payment companies and digital wallets to speed payment processing by using the USDC stablecoin as a bridge between traditional currencies. Circle did not return a request for comment. It has added dozens of payments and banking products to its mobile app over the years, a strategy that can be advanced by making it easier to convert between stablecoins and traditional currency. 

But even as stablecoins expand, payment companies will still be challenged to entice consumers and merchants to use them for routing payments, thus building habits and a base of users that can feed a super app, Alistair Newton, a research vice president at Gartner, told American Banker. "In the more developed markets, such as the U.S. and Europe, there are payment methods that are embedded pretty well. If you are trying to change behavior, you have to offer something of value beyond that."

One of the factors that has historically held back stablecoin and other crypto payments at the point of sale — and as a way to enroll new consumers and engage existing customers — is the maturity and reliability of legacy processes such as bank-issued credit cards and e-commerce sites.

The issue that has plagued crypto, including stablecoins, since the beginning has been a messy user experience, James Wester, director of payments for Javelin Strategy & Research, told American Banker. "Understanding how to send, hold, and receive tokens is confusing, and the consequences of getting it wrong mean the tokens are lost."