Prefunding — The Silent Cost of Speed
Written by Sharyn Tan (Views are my own) Faster payments sound like pure upside: instant settlement, happier suppliers, smoother cash-flow forecasting. But every corporate treasurer knows the hidden catch—the faster you need to pay, the more cash you have to park upfront. This is the paradox of prefunding, and it’s one of the biggest silent drags on working capital today. Let’s unpack why prefunding exists, why skeptics rightly push back on “magic” fixes, and how stablecoins and tokenized deposits could deliver measurable relief—without asking treasurers to take blind leaps of faith. Why Prefunding Hurts (and Why It Won’t Disappear Overnight) When you send a cross-border payment today, someone—usually your bank or a correspondent—has to hold local currency in the destination market before the payment can be credited. That’s prefunding. Multiply that across 20+ currencies, multiple payment rails (SWIFT, SEPA, FPS, SPEI, etc.), and different cut-off times, and you quickly end up with hundreds of millions (or billions) immobilised. The Pain Is Real—and Quantifiable Prefunding exists because payment systems weren’t built for a 24/7 world. Local rails have cut-offs, weekends, and holidays. To guarantee a supplier in Mexico gets paid on Friday afternoon CET, someone has to get MXN to the local account days in advance. Recent benchmarks: In a 5% interest-rate environment, every €100m sitting idle costs €5m a year in lost yield. That’s real money. Why Many Treasurers Remain (Rightly) Cautious I’ve sat in enough risk-committee meetings to know the objections by heart. They aren’t “blockchain FUD”—they are legitimate governance concerns: These aren’t trivial hurdles. Any treasurer who waves them away hasn’t spent enough time with group risk or internal audit. Where Evidence Suggests Progress Is Possible That said, the landscape in 2025 looks different from what it was in 2018. A few developments are worth watching—not as 100% proven solutions, but as signals that the industry is trying to address the concerns above: None of these examples means your company should flip a switch tomorrow. They simply show that some risk-tolerant, well-resourced players have moved beyond pilots. A Pragmatic, Low-Regret Path Forward (If You Choose to Explore) If you’re curious but cautious, here’s a sequence that minimizes irreversible commitments: Treasurer’s Take (With Full Disclosure) I haven’t run a complete end-to-end stablecoin loop inside a large corporate treasury: from digitized short-term investments → cross-border payment → supplier receipt → cash concentration back into investments, and I’m not here to claim the technology is production-ready for every treasury. Prefunding isn’t evil—it’s been the duct tape holding global payments together. But duct tape gets expensive at scale. Stablecoins and tokenized deposits aren’t science experiments anymore; they’re regulated, auditable, and already cheaper than the status quo in many corridors. Whether they succeed at scale remains an open question. But the conversation is shifting slowly from “Will this ever work?” to “Under what conditions, and for whom?” The winners won’t be the companies that adopt stablecoins or tokenized deposits for the sake of it. They’ll be the ones that treat digital settlement assets as another cash-equivalent tool—right alongside Fedwire, CHIPS, and SEPA Instant—and govern them with the same rigor. 🤠Let’s Share Realistic Perspectives How are you managing prefunding today? I’d especially value hearing from anyone who has tried and then walked away—those stories are just as useful as the success ones. Drop a comment if you’re open to swapping notes anonymously. No sales pitches, no hype—just treasurers comparing scars and scorecards. Bojan Belejkovski, Treasury Masterminds Board Member, Comments I’m in the “watching closely, testing nothing yet” camp because most of it, at least today, is hype. The prefunding problem is real – I’ve seen enough treasury operations to know cash sitting in nostro accounts “just in case” adds up fast. The opportunity cost in a high interest environment isn’t theoretical. What would actually move me from observer to pilot mode? Two things. First, I’d want to see bank-issued tokenized deposits gain real traction, not just press releases, but actual operational proof from corporate peers. If banks launched a programmable deposit product that carried the same legal and regulatory treatment as my existing deposits, that’s a different conversation. The counterparty risk profile matters more. Second, I need to see the full operational picture beyond just the payment rail. How does month-end close actually work? What did the first audit cycle look like? Did treasury headcount go up or down after implementation? Those are the details that matter when you’re pitching this to a CFO or risk committee. Right now, the smarter play seems to be optimizing what already exists – virtual account structures, instant payment rails, better cash concentration protocols. It’s not revolutionary, but it’s also not introducing new dependencies or regulatory uncertainty. The question I keep coming back to: are stablecoins solving a payments problem, or are they solving a liquidity management problem? Because those require very different governance frameworks. I’m open to being convinced, but I’d rather be 12 months late with the right controls than 12 months early with a compliance headache. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Franklin
From risk to resilience: why bank connectivity is now a CFO mandate
This article is a contribution from our content partner, Kyriba In a landscape where financial operations are as vulnerable to digital disruption as they are to economic shocks, secure bank connectivity is becoming a new pillar of corporate resilience. As CFOs shoulder broader responsibilities in safeguarding both assets and reputation, the risk of outdated connectivity now rivals traditional market risks. Security and privacy are no longer back-office concerns—they are central to boardroom strategy. In fact, 76% of CFOs now rank them ahead of inflation and market volatility, signaling a major pivot in finance leadership priorities. State of the market: Risk radar for CFOs The financial landscape is changing rapidly, and so are the threats. According to recent industry data, nearly 90% of U.S. companies faced payment fraud attempts in 2025, with AI-powered scams like deepfakes fueling a staggering 118% year-over-year increase. Manual verification methods and disconnected bank processes are no longer sufficient barriers against these sophisticated attacks. Meanwhile, regulatory scrutiny is intensifying. New mandates around transparency, sanctions, and real-time reporting are raising the stakes for compliance. Organizations relying on outdated, fragmented connectivity risk not only operational disruption, but also reputational damage and costly penalties. But it’s not just about risk. The ability to move money confidently, forecast liquidity accurately, and respond quickly to market events is now a defining factor in corporate resilience. Forward-looking CFOs are seizing this moment to transform their foundations, turning secure bank connectivity into a driver of agility and growth. While CFOs are increasingly aware of these external threats, many are overlooking a critical vulnerability much closer to home: their own bank connectivity infrastructure. Even as CFOs fortify defenses against external fraud and regulatory scrutiny, a more insidious risk often goes unnoticed within their own operations. Many organizations still rely on: While most discussions around cybersecurity focus on external threats such as cyberattacks or data breaches, CFOs often overlook another critical risk vector within their own operations: outdated and fragmented bank connectivity processes. Maintaining legacy bank connections is no longer just an IT headache—it’s an existential risk for the modern CFO. What once seemed like a technical detail now shapes the organization’s exposure to fraud, compliance penalties, and operational disruption. Here’s why: Manual, fragmented processes are ripe for exploitation by today’s sophisticated threat actors. Internal gaps and disconnected systems make it easier for fraudulent transactions to go unnoticed, introduce compliance failures, and create operational delays, especially during periods of market or geopolitical stress. CFOs can no longer afford to treat fraud as an isolated event. Robust, real-time validation and compliance tools are now essential weapons in the treasury arsenal. The good news? Forward-thinking CFOs are recognizing that modernizing bank connectivity isn’t just about risk mitigation—it’s about transformation. The strategic advantage of modern bank connectivity Upgrading connectivity is not just about plugging security holes. Modern, unified connectivity delivers: In a world of volatile FX, rising rates, and political risk, these advantages are not just operational, they’re strategic. This is where a strategic approach to connectivity becomes essential. Rather than continuing to patch legacy systems, leading organizations are embracing a fundamentally different model. How BCaaS reduces complexity and builds confidence Bank-Connectivity-as-a-Service (BCaaS) is designed to address these risks and inefficiencies head-on. BCaaS isn’t just a technical upgrade; it’s a strategic move that allows CFOs to future-proof their organizations against rapidly evolving threats. The question isn’t whether to modernize bank connectivity, but how quickly you can make the transition. Here’s what industry leaders are prioritizing: What leading CFOs are doing now CFOs leveraging centralized, managed bank connectivity and automated payment validation are better positioned to: To build resilience and stay ahead of fast-evolving risks, CFOs should: Where is bank connectivity headed? Looking ahead to the next 12–24 months, the role of bank connectivity will only intensify: In the coming year, CFOs who proactively modernize their bank connectivity will set a new standard for agility and resilience, transforming financial operations from a point of vulnerability into a source of strategic strength. Why secure bank connectivity is a strategic imperative Today’s CFOs are balancing increasing financial complexity with digital risk mitigation. With secure connectivity and automated fraud validation, CFOs can unlock new opportunities for growth, stability, and agility in an unpredictable landscape. In the end, risk is inevitable, but resilience is a choice. By transforming fragmented bank connections into a unified, secure foundation, CFOs can turn their greatest vulnerabilities into their most powerful assets. The organizations that invest in future-proof connectivity today will be the ones that lead with confidence, and emerge stronger, no matter what tomorrow brings. Investing in secure connectivity and future-proof fraud prevention isn’t just about protecting assets. It’s about enabling growth, agility, and peace of mind in an unpredictable world. Read more from Kyriba Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.