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:

• AFP 2024 Payments Survey: 62% of treasurers rank “trapped cash in prefunded accounts” among their top three liquidity frustrations.
• McKinsey (2023): Global corporates hold an estimated $2–3 trillion in low-yielding liquidity purely to support payment operations.

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:

1. Regulatory fragmentation MiCA is live in the EU, but rules differ in the US, UK, Singapore, and beyond. A solution that works in Frankfurt today might hit a wall in New York tomorrow.

2. Counterparty risk never disappears Even fully reserved stablecoins rely on the issuer’s operational soundness and the custodian’s solvency. History shows that claims of “1:1 backed” doesn’t mean bulletproof (e.g. Terra, FTX, Silicon Valley Bank).

3. Integration complexity Adding another rail means another balance to reconcile, another policy to write, another audit trail to explain. Most treasury teams are already stretched.

4. Liquidity fragmentation If a stablecoin lives on Ethereum, Polygon, Solana, and Base, how do you avoid dozens of tiny pools that are individually too small to use?

5. “We tried blockchain in 2018” fatigue Many pilots delivered PowerPoint, not production.

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:

• Licensed, supervised issuers: Circle (USDC), Paxos (PYUSD), and Société Générale Forge (EURCV) now publish regular attestations and operate under explicit regulatory frameworks (MiCA licenses, NYDFS trust charters, etc.).
• Bank-issued tokenized deposits: JPMorgan, HSBC, Citibank, Deutsche Bank, and others are starting to offer programmable liabilities that are legally identical to traditional deposits—removing the “is it really money?” debate.
• Public production examples (based on company disclosures):
  • Visa reportedly settles portions of its card-volume rails with partners using USDC, PYUSD and other fiat-backed stablecoins across Ethereum, Solana, Stellar, and Avalanche blockchains
  • Santander and Siemens issued tokenized commercial paper on public blockchain in 2023 and 2024
  • Large corporates like EY, Siemens, Nestle, IBM and SpaceX have disclosed stablecoin or tokenized cash use for supplier and treasury payments in specific corridors

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:

• Step 0 – Get the house in order first Map every prefunded account. You’ll likely find 20–40% can be reduced with existing tools: virtual account pooling, SEPA Instant, intelligent cash-concentration sweeps.
• Step 1 – Watch, don’t touch (0–6 months) Follow public attestation/proof-of-reserve reports, read the latest regulatory clarifications, attend treasury conferences where peers share unvarnished war stories.
• Step 2 – Paper-trade or sandbox (6–12 months) Many providers now offer sandbox environments. Simulate flows without moving real money.
• Step 3 – Ring-fenced pilot Start with a single non-critical corridor and a small notional (<€5m). Use a bank-issued tokenized deposit or PYUSD through PayPal if you have an account and it is available in your region —same counterparty risk profile you already accept.
• Step 4 – Evaluate ruthlessly Did reconciliation effort increase or decrease? Did audit sign off without 47 follow-up questions? Was the economic benefit material after fees?

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?

• Still relying on buffers in your accounts and manual top-ups?
• Testing virtual accounts or instant-payment pooling?
• Already running a stablecoin pilot?
• Quietly watching the space but waiting for more peers to go first?

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

• From Static Cash to Symphonic Liquidity: Orchestrating the Future with Stablecoins
• The Stablecoin Reality Check: Unlocking Liquidity or Just Relocating the Traps?

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