The landscape

Start with the payment, not the companies

A competitive landscape is usually drawn as a field of rivals. That turns out to be the wrong picture here, and it is worth seeing why before looking at any firm at all.

Consider a single payment: a European business owes a supplier in Mexico €100,000. Four separate things have to happen, and each is a different job requiring a different capability.

This matters because the four jobs have wildly different economics. Taking euros from the payer and putting pesos into the recipient's account are both nearly free — the payment systems that do it charge fractions of a cent. Moving value across the border varies enormously depending on the route chosen. And converting euros into pesos costs, at wholesale, less than one hundredth of one per cent.

Yet a European business paying that Mexican supplier is typically charged around 1.6% all in. So the interesting question is not who competes — it is where the difference goes.

A note on basis points

Almost everything below is quoted in basis points, because the numbers are small and percentages become unreadable. One basis point is one hundredth of one per cent. On a €100,000 payment, one basis point is €10. The 1.6% figure above is 160 basis points, or €1,600.

Who sits between the customer and the rail

The four jobs are rarely performed by one firm. They are performed by a chain of firms, each buying from the one closer to the payment system and reselling to the one further away. Understanding that chain is the most useful thing in this section, because it explains almost everything else — including why the firms you have heard of charge what they charge.

The research found the chain has five distinguishable steps, and that the one step with no regulatory gate at all is exactly the step that sells routing1.

Two things there are worth dwelling on, because neither is obvious and both took real work to establish.

First, firms are not where you would assume. dLocal is widely described as the local partner for Latin America. On the evidence of its own annual report it sits at the local-aggregator step: it names more than a hundred third-party entities it routes through, and its ten largest counterparties account for only 40% of the volume it processes. It is not close to the rail. It is an aggregator of firms that are.

Second, one step requires nothing at all. Thunes, TerraPay, Nium, Paysend and PPRO occupy the network-aggregator step, which has no licensing requirement, no capital requirement and no direct connection to any payment system. What they sell is the contract-gathering itself — the fact that they have already signed the agreements you would otherwise have to sign. That is a real service. The question this research had to answer is what it is worth, and the answer turns out to be uncomfortable for anyone proposing to sell the same thing.

The question every counterparty conversation should open with

Before leaving the chain, one practical finding. The unbundling question cannot be answered from public sources for a single counterparty that matters2 — not one of them publishes a payout rate card or a prefunding minimum. The reason for that silence is simple once stated: a firm selling a single leg has a per-transaction price it can publish, whereas a firm whose product is a blended conversion-plus-fee bundle cannot publish one without revealing how the bundle splits.

Which turns into a single question, worth more than any rate card:

Will you quote the payout leg as a flat fee per transaction in the destination currency, with no conversion attached?

A firm that will is selling a leg. A firm that will not is selling a bundle — and the bundle is where its margin hides.

Where the money actually goes

Now the chain and the four jobs can be put together. Here is the €100,000 payment again, with what the customer pays set against what the payment costs to produce.

That gap is the whole prize, and it is worth being precise about what it is made of. It is not a technology cost and it is not a payment-system cost; both are close to zero. The conversion costs under one basis point to manufacture at wholesale while customers pay between 52 and 4003△ — so what sits in between is distribution: the cost of reaching the customer, and the fact that the customer does not know what the wholesale price was.

That carries an uncomfortable implication which recurs throughout this work. A business built on this gap is not built on producing something more cheaply than anyone else. It is built on being the firm the customer buys from. Those are different kinds of advantage, and they decay at very different rates.

The intuition about owning rails, and why it fails

Here is the reasoning almost everyone applies to this market, ourselves included at the outset. Every step in the chain takes a margin. So a firm that removes steps — by connecting directly to the payment systems itself — ought to keep more of what the customer pays. Owning rails should mean earning more.

It is a reasonable theory, and it is testable, because several firms disclose enough to place them on both axes: how many payment systems they connect to directly, and what share of each payment they keep as revenue. That second figure is conventionally called the take rate.

Our first reading of that chart was that it showed the opposite of the theory — that owning rails went with earning less, because Banking Circle has direct access to more payment systems than almost anyone here and keeps, on the payments themselves, under four tenths of one basis point, while Zepz owns almost no infrastructure and keeps between 350 and 400.

That reading does not survive either, and it fails on evidence this work already held. Banks are missing from it. A bank owns the rails more completely than any firm in this market — banks are the correspondent network — and when a business receives a payment in a currency its own bank has to convert, the regulator-surveyed margin that bank takes is 230 to 270 basis points. Put banks on the chart and they sit at the top right: the most infrastructure, the highest price.

So there is no relationship in either direction. What the chart actually shows is two groups. Everything that sells to institutions sits at the bottom whatever it owns, because institutions negotiate and know what the wholesale price is. Everything that sells to businesses and consumers sits at the top, because they mostly do not — and the banks, who own the most, sit highest of all.

That first number deserves a note, because we had it wrong at first and the correction turned out to be more interesting than the number. We originally read it as 1.5 basis points, which is what you get by dividing the firm's entire operating income by the volume it moves. Its audited accounts break that income down, and most of it is not payments at all: €80m of net interest income and €72m of commission on fiduciary operations, against €57m of payment fees. The firm with the deepest rail ownership in this market makes most of its money holding money rather than moving it — and the balance it holds in that fiduciary capacity grew nearly fivefold in a single year.

Correcting it moves the point downward rather than up, so the pattern in the chart is stronger than we first drew it. But it also says something the chart cannot, and which matters more: owning rails may not be a payments strategy at all.

Wise is the case that explains why. It has more direct scheme connections than any other firm here, built up over eight years, and its owned-rail cost advantage is real, large and quantifiable — and it is being competed away as fast as it is earned4. The research reconstructed its unit cost at 18.6 basis points. It charges around 52. It could have kept the difference; instead it cut its price, and its net income fell 9% in a year when its volume rose 31%.

So the correct statement is not that owning rails is worthless. It is that the take rate is a function of distribution and of the customer’s alternative, not of routing intelligence5. Owning the rail sets the floor — how cheaply the payment can be produced. What is charged above that floor is set by who the customer is and what else they could do instead. The two move independently, and conflating them is how a business ends up built on the wrong thing.

One of the research documents records this as an inverse relationship holding across the disclosed names, and within those names it does. It does not survive the addition of banks, which were not among them — and we would rather show the correction than quote ourselves selectively. The conclusion it was used to support is unaffected, because that conclusion never depended on the direction of the line.

Stated plainly for our own planning: the risk of not owning a rail is a higher unit cost, and more exposure when a partner has an outage. It is not lost margin.

What this leaves for a new entrant

Three consequences follow, and they shape everything in the later sections.

The incumbents each have a reason not to route honestly. The structural weakness is not routing — it is licensed last-mile depth without balance-sheet drag6. Every established firm earns its money on one particular leg, which means recommending a route that bypasses that leg costs it revenue. A firm with no leg of its own does not carry that conflict. That is a genuine asymmetry, and it survives the obvious objection that aggregation already exists.

Most of the firms here are suppliers, not rivals. These are overwhelmingly counterparties rather than competitors, with two exceptions7. Read as a supply chain rather than a battlefield, most of this landscape becomes a list of firms to buy from at the right step — which is a considerably more useful list.

Neutrality and principal economics cannot both be claimed. The asymmetry above works only for a firm with no leg of its own. The payments-company interpretation chooses the conversion because that is where the measured pool sits and therefore forfeits the neutrality argument and should stop citing it8. The platform-company interpretation preserves neutrality by remaining outside the principal payment economics and charging the licensed institution instead. That is a real fork in operating role, not a positioning choice.

What the buyers are doing

One last piece of context, because it bears on how this ends. Consolidation is running hard, and value is accruing to distribution and to licensed local rails — not to routing9. Eight firms in this layer changed hands in the eighteen months to August 2026. Not one was bought for a routing layer. The largest of them was bought for orchestration plus more than twenty-five licences, 130 markets and live volume — which is a statement about what the acquirers believe is scarce.

The payments-company interpretation concludes that acquisition is the realistic outcome, and the good one to plan for10 once volume and operating data exist. The platform-company interpretation reads the same transactions as evidence to build contracted recurring revenue and system-of-record status first, so the company is valuable without a sale. The acquisition record establishes what has been bought; it does not by itself choose between those two assets.