Evaluating the Costs: What to Expect from Fiat Infrastructure Providers

Introduction

Starting a fintech venture is exciting, especially when you’re bridging the gap between cryptocurrency and traditional finance. However, when you dive into this space, one of the most critical pieces of your business puzzle will be fiat infrastructure. This infrastructure is the backbone that allows your users to easily convert cryptocurrency into traditional currencies like dollars, euros, or yen, and vice versa. Without it, your business could face significant hurdles in scaling and integrating into the global financial ecosystem. Understanding the costs associated with fiat infrastructure is essential, as these costs can quickly add up and influence the profitability and long-term sustainability of your venture.

 

Why Fiat Infrastructure is Critical for Crypto Businesses

For fintech startups and established companies alike, fiat infrastructure is the gateway to the traditional financial system. It allows crypto companies to move between digital currencies and fiat seamlessly, thus making it easier for users to adopt crypto products. The ability to easily exchange between crypto and fiat currencies, particularly in volatile markets like Latin America or Asia, is a significant draw for users, especially those who are new to the crypto space​

Fiat infrastructure also builds trust with your user base. Even if your business operates primarily in crypto, many users feel more comfortable when they can interact with familiar fiat currencies. This is particularly crucial when targeting users who are less familiar with cryptocurrency. Fiat integration simplifies user experience, as they can deposit, withdraw, and convert currencies easily, and trust that their money is secure.

Additionally, regulators in major markets, such as the EU and the US, are increasingly enforcing rules around data security, KYC (Know Your Customer), and AML (Anti-Money Laundering) compliance​. Fiat infrastructure helps crypto businesses remain compliant with these regulations by providing secure channels for transactions and legal frameworks for conducting business globally.

Understanding the Types of Fiat Infrastructure Providers in Latin America

Latin America presents a unique landscape for cryptocurrency adoption due to several factors: high inflation rates, weak local currencies, and a large unbanked population. The role of fiat infrastructure providers is crucial in bridging the gap between the crypto ecosystem and traditional financial systems, especially in regions where fiat currency volatility is a concern.

1. Payment Gateways

Payment gateways play a central role in enabling businesses to accept payments in local fiat currencies via traditional methods such as credit cards, bank transfers, and mobile payments. In Latin America, specific challenges arise due to the diversity of payment preferences across countries and the high usage of alternative payment methods such as cash-based options like OXXO in Mexico or Boleto Bancário in Brazil.

Latin America has seen a growing number of local payment gateway providers that cater to regional preferences. DLocal, a Uruguay-based fintech company, is a notable example. It specializes in cross-border payment solutions for emerging markets, including Latin America. By integrating local payment methods with international platforms, DLocal helps businesses accept payments in over 600 local payment methods across multiple countries.

Another example is MercadoPago, the financial arm of MercadoLibre, which provides payment gateway services that facilitate fiat-to-crypto transactions. With MercadoPago, users can easily buy cryptocurrencies like Bitcoin using their local currency, providing seamless on-ramps to the crypto market. Its widespread adoption across Latin America, particularly in Argentina and Brazil, has made it a go-to payment provider for businesses seeking to integrate fiat payment options.

2. Banking Partners

Banking partners form the foundation of fiat infrastructure, providing access to fiat accounts, local payment networks, and liquidity. Latin American banking partnerships come with their own set of challenges, including stricter regulations and fewer crypto-friendly banks compared to Europe or the United States. However, the region has seen increasing interest from local banks to collaborate with crypto platforms due to the rising demand for cryptocurrency.

A significant example is Banco Galicia, one of Argentina’s largest private banks, which became one of the first traditional financial institutions in the region to offer cryptocurrency services. Through its platform, users can buy, sell, and hold cryptocurrencies like Bitcoin and Ethereum. This partnership illustrates how local banking institutions are adapting to the growing demand for crypto services.

Another player in this space is Bitso, a Mexico-based crypto exchange. It partners with traditional banks and payment providers to offer a seamless crypto-to-fiat conversion experience. In Mexico, where remittances play a huge role in the economy, Bitso allows users to receive remittances in crypto and quickly convert them into local fiat currency.

The role of local banks in Latin America is crucial for integrating crypto with local economies. By offering services such as remittances, transfers, and fiat withdrawals, banking partners create a vital link for users to access their funds in the real world.

3. Liquidity Providers

Liquidity providers are essential for ensuring that users can easily convert crypto into fiat and vice versa without significant delays or price fluctuations. In Latin America, where fiat currencies like the Argentine peso and Venezuelan bolívar are subject to high inflation, maintaining adequate liquidity is crucial for crypto platforms that need to handle large withdrawal requests.

In Argentina, for instance, the demand for liquidity is driven by high inflation and currency devaluation. Local crypto platforms such as Ripio partner with liquidity providers to offer stablecoin options (like USDT) as a safer alternative for users. These liquidity providers help to mitigate volatility risks by offering crypto-stablecoin-fiat conversion services that cater to user demands for stable and fast transactions.

Platforms like Belo in Argentina also collaborate with liquidity providers to enable fast crypto transactions in volatile economies. By offering liquidity solutions tailored to local market conditions, these providers ensure that users can convert their crypto holdings into stable fiat currencies when needed, without facing large spreads or significant delays.

For crypto businesses, having a reliable liquidity provider is key to offering competitive conversion rates and maintaining a smooth user experience, especially in regions like Latin America where local fiat currencies are prone to frequent fluctuations.

4. Processing Platforms

Processing platforms are the behind-the-scenes engines that handle the heavy lifting of crypto-to-fiat conversions, ensuring that transactions are fast, secure, and compliant with regulations. These platforms provide APIs that integrate seamlessly with fintech and crypto applications, automating the conversion process for end users.

In Latin America, BitPay is a major player that enables businesses to accept crypto payments and convert them into local fiat currencies such as the Brazilian real or Mexican peso. By leveraging BitPay’s processing platform, businesses can offer crypto payment options to customers while automatically converting the crypto into fiat upon receipt, minimizing their exposure to crypto price volatility.

Another example is Settle Network, a processing platform that operates throughout Latin America, enabling businesses and users to convert crypto assets into fiat across various Latin American countries. Settle Network focuses on enabling cross-border remittances and payments, crucial in a region where international money transfers play a significant role in local economies. With its partnerships across banks and crypto exchanges, Settle Network provides a comprehensive crypto-to-fiat conversion solution that caters to the unique challenges of Latin American financial systems.

Processing platforms like BitPay and Settle Network provide the technical infrastructure needed to integrate crypto payments into everyday transactions while ensuring that businesses and consumers are shielded from crypto volatility by converting digital assets into fiat in real-time.

Common Costs Associated with Fiat Infrastructure Providers

Transaction Fees

One of the most significant cost components associated with fiat infrastructure providers is transaction fees. Whether it’s a deposit, withdrawal, or currency conversion, most providers charge fees for each transaction processed. These fees can vary widely depending on the provider and the volume of transactions you process.

For instance, payment gateways like Stripe charge a flat fee per transaction, while more complex fiat infrastructure providers may offer tiered pricing based on the volume of transactions processed monthly. As your business scales, you may be able to negotiate lower transaction fees by processing higher volumes.

Maintenance and Account Fees

Some providers charge ongoing maintenance or account fees. For example, banking partners may charge a monthly or annual fee for maintaining an account, and payment gateways may have service fees for continued access to their systems. These recurring charges can be easily overlooked, but they can accumulate over time, especially for startups with limited cash flow.

Currency Conversion Costs

Converting between different fiat currencies or between crypto and fiat can introduce additional costs, particularly in cross-border transactions. For example, when handling payments across regions like Latin America or Southeast Asia, you may encounter not only conversion fees but also higher volatility in exchange rates, which can further impact your cost structure.

Hidden costs like currency fluctuations are common in volatile markets, where currency values change rapidly. Providers often charge higher fees in such regions to mitigate the risks of handling currency conversions. Make sure you calculate these costs as part of your overall financial planning.

Liquidity Provision Fees

To ensure you always have enough fiat liquidity to handle user transactions, many businesses partner with liquidity providers. These providers charge fees based on the volume of liquidity your business needs to manage daily transactions. Liquidity provision fees are usually based on the size and frequency of withdrawals, and they tend to rise as your business grows. Having sufficient liquidity is essential, especially if your business handles large volumes of crypto-to-fiat conversions.

Compliance and Legal Costs

Another critical area that adds to your cost structure is compliance with local regulations. Providers often pass on costs associated with meeting regulatory requirements, such as KYC and AML procedures. These compliance costs are necessary to ensure your business operates legally in different markets, but they can be quite substantial. Providers may also charge for audits, legal consultations, and other compliance-related services.

Factors That Influence Pricing for Fiat Infrastructure Providers in Latin America

Fiat infrastructure pricing is complex and influenced by several factors, particularly when operating in regions like Latin America, where market conditions, currency volatility, and regulatory challenges can significantly impact costs. 

1. Transaction Volume and Frequency

Transaction volume and frequency are major factors in determining pricing. For businesses that process large transaction volumes, such as crypto exchanges or payment processors, negotiating lower fees with providers is more feasible. Larger businesses can take advantage of economies of scale, where providers offer tiered pricing models based on the amount of transactions being processed.

For example, a company like Bitso, one of the largest crypto exchanges in Mexico, likely benefits from lower fees due to the massive volume of crypto-to-fiat transactions it handles daily. Bitso processes millions of dollars in transactions each day, and as such, it can negotiate better rates with liquidity providers, leading to more favorable pricing. This differs from smaller crypto exchanges or fintech startups in the region that may face higher per-transaction costs due to lower transaction volumes.

This pricing model often applies to payment gateways as well. Businesses operating with high-frequency microtransactions, such as remittance services or peer-to-peer payment platforms, can also negotiate more favorable pricing terms with providers as they scale up their user base and transaction volume.

2. Cross-Border Transactions

For fintech businesses operating in multiple countries, especially in Latin America where currency exchange volatility is common, cross-border transactions introduce additional layers of cost. Processing payments across borders requires handling foreign exchange rates, currency conversions, and dealing with fluctuating market conditions. This is particularly true for businesses operating in countries like Argentina and Venezuela, where inflation rates and currency devaluation add significant complexity.

For example, companies like Ripio and SatoshiTango—both based in Argentina—must deal with the country’s unstable currency, the Argentine peso. This introduces costs associated with constantly fluctuating exchange rates and higher demand for stablecoins (such as USDC or DAI) to protect users from currency devaluation. Foreign exchange fees, transaction delays, and price discrepancies become more pronounced in such markets, which providers pass on to the businesses in the form of premium charges.

Additionally, the cost of cross-border transactions rises in cases of remittances, where providers like MoneyGram or crypto platforms like Bitso offer cryptocurrency-based remittances to countries with significant diaspora populations, such as Mexico. These platforms often face higher fees due to the volatility and risk associated with converting crypto into local currencies across different jurisdictions.

3. Service Customization and Integration

Customizing fiat infrastructure to meet specific business needs, such as integrating crypto-to-fiat solutions within your platform or app, can result in high upfront and ongoing costs. Businesses may need to invest in software development, security protocols, and compliance features that are uniquely tailored to their local market requirements.

For example, platforms like Buenbit in Argentina and Belo provide seamless crypto-to-fiat conversions for their users. These fintech apps require deep integration with local banking systems to allow users to deposit or withdraw Argentine pesos into their accounts after converting cryptocurrency into local currency. Developing these integrations with banking partners, including building out APIs for handling transactions, leads to substantial upfront development costs.

4. Risk Management and Fraud Prevention

In Latin America, where fraud and cybercrime are prevalent, security is a major concern for fintech businesses handling fiat and crypto transactions. Providers often offer additional fraud prevention tools, identity verification services, and risk management solutions, which come at an additional cost.

These services are particularly critical in countries like Brazil and Colombia, where fraud rates in online transactions are high. For example, MercadoPago—the payments arm of MercadoLibre—has invested heavily in fraud prevention technologies to safeguard transactions and offer chargeback protection for businesses.

Providers that offer advanced fraud detection, such as real-time transaction monitoring or identity verification systems (e.g., KYC/AML compliance), often charge premium fees for these services. However, this is an essential investment for fintech companies, as neglecting proper security measures can lead to significant losses due to fraud, chargebacks, or regulatory non-compliance.

Investing in fraud prevention is especially crucial for businesses dealing with cross-border transactions, where the risk of fraud is higher. Companies operating in volatile regions like Venezuela or dealing with high remittance flows to countries like El Salvador (which adopted Bitcoin as legal tender) must take extra steps to prevent fraudulent activities, making risk management fees a necessary, albeit expensive, part of doing business.

 

How to Evaluate and Compare Fiat Infrastructure Providers

When selecting a fiat infrastructure provider, particularly in the fast-evolving and competitive world of fintech, it’s crucial to look beyond just the sticker price. A comprehensive evaluation that considers long-term costs, service quality, and overall value is key to ensuring you partner with the right provider.

1. Total Cost of Ownership (TCO) Approach

The Total Cost of Ownership (TCO) is a holistic approach that considers both the upfront costs and recurring costs of using a fiat infrastructure provider. It goes beyond simply looking at the transaction fees or setup costs and dives into the hidden costs that could impact your business in the long run. For example:

• Upfront Costs: These include the initial setup fees, integration costs, and any licensing fees associated with using the provider’s platform.
• Recurring Costs: These encompass transaction fees, maintenance fees, compliance costs, and currency conversion costs, especially if you’re operating in volatile regions like Latin America.

It’s important to also consider indirect costs like downtime, poor customer support, or regulatory fines due to non-compliance. Providers with unreliable uptime or inefficient support systems may appear cheaper initially but could end up costing your business more in the form of lost transactions, customer churn, or penalties from non-compliance with local regulations.

For instance, a low-cost provider in Latin America may have slower transaction processing times or limited liquidity, which could result in delays when users try to convert their crypto into local fiat currencies. This could lead to frustration for your customers, especially in regions like Argentina or Venezuela, where people are often looking to convert crypto into stablecoins quickly to avoid inflationary losses.

Key TCO Considerations:

• Uptime and Reliability: How frequently does the provider experience downtime? What is their SLA (Service Level Agreement) on uptime?
• Support and Responsiveness: What level of customer support do they offer? Are there additional costs for priority or 24/7 support?
• Compliance and Regulatory Support: Does the provider assist with KYC/AML compliance? Are they aware of and compliant with local regulations in different countries?

A company like BitPay or Wyre, which offers robust compliance support and integration with multiple banking systems, might cost more upfront but save you significant resources over time due to smoother operations and stronger regulatory backing.

2. Negotiating with Providers

Negotiation is a critical part of selecting a fiat infrastructure provider. Given the highly competitive nature of the fintech space, providers are often willing to adjust their pricing to secure your business, especially if you have significant transaction volumes or offer the potential for growth.

Before negotiating, you should:

• Understand Your Transaction Volumes: Providers often offer tiered pricing based on transaction volumes. If you can show consistent or projected growth in transaction volumes, this can serve as leverage during the negotiation process.
• Leverage Competition: Don’t hesitate to get quotes from multiple providers and use that information in your negotiations. Let providers know you’re considering other options, which could prompt them to offer you more competitive rates.

For instance, larger platforms like Coinbase can negotiate better rates due to their massive transaction volume, but even smaller fintechs can secure volume-based discounts by presenting accurate forecasts of their growth potential. In Latin America, where cross-border payments and remittances are essential, providers like MercadoPago or DLocal might offer discounts for businesses handling large volumes of remittances or international transactions.

Negotiation Tips:

• Ask for Volume Discounts: Highlight your business’s potential for growth and ask for sliding scale pricing based on future transaction volumes.
• Bundle Services: If a provider offers multiple services, such as fraud protection or KYC services, ask if bundling those services can reduce costs.
• Long-Term Contracts: Consider negotiating for multi-year contracts in exchange for lower fees, though this comes with the risk of locking yourself into one provider.

3. Balancing Cost with Value

While cost is an important factor, the value you get from your provider is equally important. Sometimes, paying a premium for a provider can result in better service, more reliable operations, and enhanced security, all of which can save your business money in the long run.

For example, when operating in Latin America, where currencies are volatile and regulations vary greatly between countries, paying more for a provider that offers strong regulatory compliance and superior fraud prevention can be invaluable. A provider like Settle Network, which is highly integrated into local banking systems across the region, may come at a higher price, but the reduced risk and smoother cross-border payments could offer greater value for businesses operating in multiple countries.

Additionally, fintech companies that deal with high transaction volumes or cross-border payments might benefit from investing in premium services like advanced fraud detection or instant currency conversion, even if they come at higher fees. For example, Bitso and Ripio offer more premium services that cater to high-value transactions and provide added layers of security and compliance, which might be worth the extra cost for businesses handling sensitive data and large sums of money.

When to Consider Paying More:

• Higher Uptime and Better Reliability: If your business depends on high-volume transactions with minimal delays, it’s worth paying for providers that guarantee high uptime and fast transaction processing.
• Security and Compliance: Paying for advanced fraud prevention services and strong KYC/AML compliance can protect your business from financial and legal risks.
• Service Customization: If you need tailored solutions, such as custom APIs or support for specific local regulations, a more premium provider with the technical capability to customize services is likely worth the higher price tag.

 

Case Studies: Cost Structures of Successful Crypto-Fiat Partnerships

Navigating the costs associated with fiat infrastructure providers can make or break a crypto business. 

1. Bitso: Navigating Cross-Border Payments in Latin America

Bitso, a leading cryptocurrency exchange based in Mexico, has become a pioneer in Latin America by focusing on providing easy access to cryptocurrency and facilitating seamless crypto-to-fiat conversions. One of the biggest challenges Bitso faced was navigating the complex cross-border payment landscape and working with various fiat providers to support both crypto-to-fiat and fiat-to-crypto transactions across different countries in Latin America.

Cost Breakdown:

• Liquidity Providers: Bitso needed liquidity providers to ensure there was enough fiat currency available for users to convert crypto into local currencies. This came with costs such as liquidity provision fees and currency conversion fees, especially when operating in volatile markets like Argentina.
• Payment Gateways: Bitso had to partner with local banks and payment gateways to support fiat transactions, adding transaction fees, account maintenance costs, and the occasional currency conversion charges.
• Cross-Border Transaction Fees: Given the remittance-heavy use case, Bitso had to factor in costs related to cross-border payments and handling currency fluctuations, particularly when dealing with countries like Argentina and Venezuela, where currency depreciation is a constant risk.

 

2. Ripio: Scaling While Managing Fiat Infrastructure in Argentina

Ripio, an Argentine crypto platform, had to overcome unique challenges posed by the Argentine peso’s volatility and the country’s complex financial regulations. To offer crypto-to-fiat services, Ripio needed to work with local banks and liquidity providers while navigating Argentina’s high inflation and currency restrictions.

Cost Breakdown:

• Currency Conversion Costs: Given the fluctuating exchange rates in Argentina, Ripio incurred significant costs related to converting cryptocurrency into pesos. These costs were further amplified by inflation and foreign exchange controls imposed by the government.
• Liquidity Provision Fees: To maintain liquidity for crypto-to-fiat transactions, Ripio worked with liquidity providers who charge fees based on the volume of currency exchanged. In times of high inflation, liquidity provision costs tend to increase as users rush to convert crypto to stablecoins or fiat.
• Compliance and Legal Costs: Ripio faced high costs associated with regulatory compliance due to Argentina’s strict currency controls and crypto regulations. This required ongoing audits, legal consultations, and investments in compliance infrastructure to meet local requirements.

 

Conclusion: 

Understanding the cost components of fiat infrastructure is crucial for your success. These costs—transaction fees, maintenance charges, liquidity provision, compliance, and fraud prevention—can add up quickly. Evaluating providers based on Total Cost of Ownership (TCO) and balancing cost with value will help you make informed decisions that support your business growth. Don’t hesitate to negotiate and consider long-term partnerships that offer both financial savings and reliable service.