Users of PayPal’s overseas money transfer app Xoom will pay no fees if they use the company’s stablecoin, PYUSD, to fund their transfers. The move is a way for PayPal to build out its share of the international remittance market, where it trails market leader Wise, and to expand the use case for PYUSD, which it launched last year.
In an interview with Fortune, PayPal SVP Jose Fernandez da Ponte said Xoom senders will pay none of the customary fees—which average 2% across the industry—while the recipients will receive the funds in their local currency as usual. He added that Xoom provides services in 160 countries and has a network of more than 350,000 cash pickup locations. While Xoom will eliminate transaction fees for PYUSD transfers, users will still pay in the form of the customary foreign exchange spread.
“For mainstream adoption of digital currencies, you need two things—frictionless experience for consumers and merchants, and a reason to use them. That can be either convenience or financial incentives,” Fernandez da Ponte said.
PayPal’s PYUSD, like other stablecoins, is a blockchain token that is backed by reserves and designed to maintain a peg to the U.S. dollar. While stablecoins are primarily used in crypto markets, Fernandez da Ponte and others view them as a means of transferring money that is faster and more efficient than conventional fiat currency networks.
The stablecoin industry is currently dominated by market leaders Tether and Circle, whose USTD and USDC command a market cap of around $100 billion and $30 billion, respectively, while PayPal is currently seventh-biggest at around $225 million.
Fernandez da Ponte says PayPal is playing the long game when it comes to stablecoins, and he believes the business model of garnering interest on the reserves—which is currently lucrative for Tether and Circle—will not be viable in the long run as interest rates fall. Instead, he envisions PYUSD will pay off for the company in terms of so-called take rates and other traditional payment industry services.
As PayPal waits for the stablecoin industry to mature, the company has has been disbursing PYUSD on a variety of platforms, including its popular peer-to-peer payment service Venmo, and using it to make investments via its venture arm. Fernandez da Ponte also noted that PayPal plans to explore the use of PYUSD to pay its vendors in coming months.
As for remittances, the fact that transfers funded by PYUSD will be converted to local currencies for the recipient means the new service won’t have a noticeable impact on the overall supply of PayPal’s stablecoin. But Fernandez da Ponte noted that the company has evidence that recipients of remittances are more likely to embrace crypto, so the service may lead to expanded opportunities in the future.
