Why Figure's Pareto Improvement Strategy Dominated the RWA Market in Q3 2025

When all parties in a financial transaction simultaneously achieve better outcomes, that’s a pareto improvement—and it’s rarely seen in traditional finance. Yet Figure Technology Solutions achieved precisely this across its Q3 2025 operations, establishing itself as the undisputed leader in Real-World Asset tokenization. The company’s combination of blockchain technology, institutional partnerships, and product innovation created a rare scenario where lenders, borrowers, institutions, and retail investors all won simultaneously.

In Q3 2025, Figure delivered extraordinary financial results: $156.37 million in net revenue and $90 million in net profit, yielding a 57% net profit margin. But these numbers tell only part of the story. What truly separates Figure from the crowded fintech landscape is how it engineered these profits. Rather than extracting value at customers’ expense, Figure’s blockchain-native operating model enables what we might call “shared prosperity economics.”

The Pareto Improvement in Asset Origination: HELOC as the Foundation

Figure’s flagship HELOC product exemplifies pareto improvement across multiple stakeholder groups. Consider the traditional path: homeowners waited 30-45 days for loan processing involving manual assessments, physical notarizations, and an average origination cost of $11,230. Figure compressed this to 5-minute approval and 5-day disbursement, while slashing costs to $730—a stunning 94% reduction.

This wasn’t a zero-sum game. Homeowners benefited from speed and cost savings. Originating partners (banks and credit unions) saved dramatically on processing expenses. Institutional buyers gained access to standardized, transparent credit assets they could securitize with AAA ratings from S&P and Moody’s. Each stakeholder genuinely improved their position.

The scale demonstrates market validation: Figure has disbursed over $19 billion in HELOC volume as the largest non-bank originator in the United States. But what captured market attention in Q3 2025 was the explosion in first lien HELOC products. This offering—essentially cash-out refinancing reimagined through blockchain—saw transaction volume nearly triple year-over-year.

Why this matters for pareto improvement:

• Borrowers: $1,000 origination cost vs. industry standard $12,000; approval in minutes instead of weeks
• Originators: Eliminated back-office bottlenecks; capital recycled faster without balance sheet drag
• Secondary market: Real-time settlement and AAA-rated securitization created efficient price discovery
• Market: First lien HELOC grew from 10.5% of originations in Q3 2024 to 17% in Q3 2025, capturing $425 million in quarterly volume

The emergence of DSCR (Debt Service Coverage Ratio) loans for real estate investors further demonstrated Figure’s horizontal expansion capability. Despite representing just 0.02% of originations in Q2 2025, DSCR contributed over $80 million by Q3—explosive growth powered by the same blockchain efficiency architecture that scaled HELOC.

Revenue Streams: Diversification That Reflects Ecosystem Value Creation

Figure’s Q3 revenue structure reveals the architecture of pareto improvement:

Loan Sales ($63.56M): The largest revenue component demonstrates Figure’s role as a true market-maker. Of this, $51.72 million came from whole loan sales, where Figure transfers loans to institutional buyers within days rather than months. The remaining $8.27 million from securitized loan proceeds showcases how blockchain enables standardization—loans previously too heterogeneous for efficient securitization now achieve AAA ratings through data integrity and on-chain verification.

Technology and Ecosystem Fees ($35.69M): This category separates Figure from traditional lenders. The $15.55 million in technology fees reflects what institutions pay for access to Figure’s Provenance blockchain infrastructure. The $16.25 million in ecosystem fees (essentially a matching premium) demonstrates how real-time settlement commands premium valuations. In traditional secondary lending markets, settlement took months; Figure offers days or seconds. That pareto improvement justifies the fee structure.

Loan Origination Fees ($21.42M): Direct processing fees, loan discounts, and origination charges reflect the efficiency embedded in Figure’s automated system. The company connects borrowers’ bank accounts for instant income verification, replaced costly on-site appraisals with Automated Valuation Models (AVM), and digitized title searches and remote notarization. The cost savings translate to lower borrower fees—pareto improvement manifest.

Interest Income ($17.86M): Figure retained approximately 5% of risk in securitized assets plus interest from its core HELOC portfolio. This serves dual purposes: it demonstrates Figure’s confidence in asset quality to institutional investors, while providing recurring revenue. The risk retention model creates another pareto outcome—Figure profits from quality assets it originated, yet institutions sleep soundly with Figure having “skin in the game.”

Capital Protection and the Sixth Street Partnership: Creating Market Liquidity

Figure’s joint venture with Sixth Street through Fig SIX Mortgage LLC represents institutional recognition of blockchain’s fintech potential. Sixth Street committed $200 million in recyclable equity capital to act as a “buyer of last resort,” ensuring that originators always have a buyer waiting on Figure Connect.

This mechanism transformed what was historically a fragmented, opaque market into one with efficient price discovery. Originators no longer face uncertainty about asset distribution—they’re guaranteed execution at competitive market prices. Fig SIX benefits from fee income as it facilitates transactions. Institutions buying through Figure Connect gain transparent, standardized assets. Again, pareto improvement.

More significantly, Fig SIX’s risk retention structure—where it holds the “first loss” portion of securitized assets—enables senior tranches to achieve AAA ratings. By absorbing credit risk first, Fig SIX protects upper-level investors and justifies the fee premium they’re willing to pay.

The DeFi Bridge: Democratizing Pareto Improvement

Perhaps Figure’s most innovative application of pareto improvement emerges through its Democratized Prime protocol. Traditional prime brokerage was an exclusive club—only institutions with millions in capital could participate in high-quality credit markets. Figure inverted this model.

Through Democratized Prime, retail investors need only $100 to lend against tokenized HELOC assets. By mid-2025, lenders earned approximately 9% annualized returns—significantly higher than money market funds or YLDS stablecoin yields. Simultaneously, institutions obtained cheaper funding than traditional warehouse lines of credit.

The protocol’s mechanics ensure security through DART technology (perfect mortgage right verification), real-time LTV monitoring, and automatic liquidation at 90% LTV threshold through weekly BWIC transactions. This architecture creates pareto improvement on another dimension:

• Retail investors: Access to institutional-grade credit assets with meaningful yields
• Institutions: Lower-cost funding with real-time interest rate discovery
• Asset originators: Multiple funding channels beyond traditional banks

The expansion to Layer 1 ecosystems (Solana and Sui) through PRIME liquidity staking tokens demonstrates Figure’s commitment to ecosystem-wide pareto improvements, not just traditional DeFi.

$YLDS: The Compliant Stablecoin That Enables Pareto Settlement

Figure’s SEC-registered stablecoin, $YLDS, emerged as a critical enabler of the entire ecosystem. Issued by Figure Certificate Company (registered under the Investment Company Act of 1940), $YLDS represents digital certificates backed 100% by Treasury securities and money market instruments.

The pareto improvement here operates across multiple layers:

For institutions: $YLDS offers SOFR minus 50 basis points—genuine yield in an on-chain settlement vehicle. Traditional stablecoins offered no yield; compliant alternatives faced regulatory uncertainty. $YLDS solved both problems.

For settlement: 24/7 on-chain peer-to-peer transfers replaced traditional banking hours and multi-day settlement cycles. Users purchase Bitcoin directly with $YLDS; Figure’s mirrored order mechanism handles the bridging through its Figure Payments Corporation—near-instant settlement versus traditional 2-3 day cycles.

For ecosystem participants: $YLDS serves as the default settlement currency on Figure Markets, creating instant composability. Borrowers receive YLDS disbursements, can immediately invest or stake them, without withdrawal friction.

The scale reflected this adoption: $YLDS balance grew from $4 million in Q2 2025 to nearly $100 million by November—a 25x increase in six months. Expansion into Solana and Sui indicated market validation beyond Figure’s native ecosystem.

Q3 Financial Performance: The 57% Profit Margin Revealed

The 57% net profit margin demands examination. In traditional lending, margins hover around 3-5%. How did Figure achieve this?

The answer crystallizes around pareto improvement economics. Traditional lenders face structurally high costs: physical branch networks, manual underwriting, paper documentation, extended settlement cycles. Figure eliminated these through automation and blockchain settlement.

Cost structure transformation:

• Loan origination: $11,230 → $730 (94% reduction)
• Processing timeline: 45 days → 5 days (89% reduction)
• Asset standardization: Previously unsecurable → AAA-rated bonds
• Secondary market liquidity: Months → days/seconds

These efficiencies don’t extract value from customers. Instead, they enable pareto improvement: lower borrower costs, faster institutions, better returns for DeFi participants, and premium margins for Figure on a relatively asset-light model.

The $63.56 million in loan sales revenue demonstrates Figure’s strategic approach. Rather than holding mortgages on its balance sheet (expensive, illiquid), Figure originated loans and rapidly distributed them. This generated upfront transaction fees while maintaining recurring interest income on retained assets. The pareto outcome: borrowers got funding they needed, originators got capital-efficient distribution, and institutions got standardized secondary market assets.

Why 2025 Proved to Be a Turning Point

Q3 2025 represented a culmination of multiple strategic moves. Figure completed its IPO with market capitalization stabilizing between $7.5-9 billion. More significantly, it merged with Figure Markets, integrating asset origination with a digital trading platform.

This vertical integration completed the pareto improvement vision. Consumers could now:

1. Access home equity funding via HELOC
2. Receive $YLDS stablecoins directly
3. Invest or stake those stablecoins on Figure Markets
4. Exit with minimal friction

No traditional lender offers this seamless experience because traditional architecture makes it economically infeasible. Blockchain economics—where settlement costs approach zero and ownership transfer requires no intermediary—makes it not just possible but natural.

The Moat: Not Technology, But Ecosystem Architecture

Industry observers often attribute Figure’s leadership to “proprietary blockchain.” This misunderstands the competitive advantage. The real moat is ecosystem lock-in through pareto improvement.

Figure’s Provenance blockchain technology provides tools, but the sustainable advantage emerges from having aligned incentives:

• Borrowers benefit from speed and cost savings
• Originators benefit from capital efficiency
• Institutions benefit from transparency and AAA assets
• Retail investors benefit from $100 access to credit markets
• Settlement participants benefit from 24/7 on-chain liquidity

When every stakeholder simultaneously achieves better outcomes than alternatives, ecosystem switching becomes economically irrational. That’s the moat. Not code, but aligned interests.

The competitive response from traditional finance remains sluggish precisely because their legacy cost structure prevents matching Figure’s pricing and speed. To compete, they’d need to fundamentally restructure—an existential threat to their business model. Meanwhile, crypto-native platforms lack Figure’s institutional credibility and regulatory compliance advantages.

Figure occupies the rare competitive sweet spot: blockchain efficiency with institutional safeguards.

Investment Thesis: Pareto Improvement as Durable Advantage

Figure’s Q3 performance and business architecture demonstrate why it claims the position of undisputed RWA leader. The company didn’t win through zero-sum extraction. It won through creating pareto improvements—ensuring that lenders, borrowers, institutions, and retail participants all achieved superior outcomes simultaneously.

This approach builds sustainable competitive advantage because:

1. Network effects accelerate: More asset originators join because capital distribution is proven. More institutions participate because AAA-rated assets are real. More retail investors participate because 9% yields outperform alternatives. Each cohort joining makes the platform more valuable for existing participants.

2. Cost structure advantages compound: As origination volume scales, per-unit costs decline further. The $730 per loan cost may compress to $500, enabling even lower borrower fees and wider adoption.

3. Market structure shifts toward blockchain: As regulators recognize blockchain’s productivity benefits and institutions experience settlement cost reductions, the sector naturally gravitates toward on-chain infrastructure. Figure’s early move establishes standard-setting authority.

4. Ecosystem defensibility grows: The more participants depend on the pareto improvements Figure enables, the higher the switching cost. This isn’t lock-in through restriction; it’s lock-in through genuine value creation.

For investors evaluating Figure’s $7.5-9 billion market capitalization, the relevant question becomes: In a world where RWA tokenization becomes standard fintech infrastructure (increasingly likely), how much value accrues to the company that architected the ecosystem-wide pareto improvement?

Based on Q3 results and the strategic positioning, Figure’s path to sustained market leadership appears durable. The company didn’t just achieve a profitable quarter—it demonstrated how blockchain can structurally reshape financial services through pareto improvement economics.