What Is Prefunding? The Cost of Speed in Cross-Border Payments

Prefunding is money placed in the account a payment will be made from before the funds that pay for it have arrived. The money is the provider’s own, and it usually sits in the destination country before the payout is made.

For a business that pays suppliers, contractors or customers abroad, that prefunded balance shapes how fast a payment arrives, what happens to it over a weekend, and part of the price the business pays.

Why Speed Requires Money in Place

A cross-border payment has two speeds that are easy to treat as one. Payout speed is how quickly the recipient is credited. Settlement speed is how quickly the sender’s money reaches the account the payout was made from. When a provider pays a recipient before the sender’s money reaches that account, the money for the payout has to come from somewhere else. When the provider puts it there in advance, that is prefunding. It usually waits in the destination country, in the currency the recipient will be paid in. When the payout waits for settlement, nothing has to be placed in advance, but the recipient waits too.

Wise, a provider that competes on speed, states in its annual report that its funding sources let it speed up payment processing by prefunding payout accounts. A provider that pays out only after collecting the money it is paying out never has to advance its own capital, and gives up speed in exchange.

Take an illustrative platform that pays out the equivalent of $2 million a day to recipients in one country, every day of the week, through a provider whose refills of the local payout account land on the next business day. On a normal weekday morning, $2 million has to be sitting in that account already, because the money that will fund that day’s payouts is still on its way.

How Much Has to Sit in Place

Two numbers set the size of a prefunded balance. One is how much is paid out each day, and the other is how many days a refill takes to arrive. Before any buffer, the balance is roughly the first multiplied by the second.

How Much Is Paid Out Each Day

The first number starts from what a provider expects to pay out each day. To that it adds a buffer and subtracts whatever arrives in the same period from money running the other way. Sizing the balance to an average day leaves it short on every day busier than average, so the buffer depends on how far the forecast can miss. Two providers with the same volume can hold different amounts if one forecasts its flow more closely than the other.

The requirement also grows with volume. Remitly, a US remittance provider, funds many of its payout partners one to two business days ahead of expected volume. It held $234.6 million in prefunding at 30 June 2026, in a quarter with $23.5 billion of send volume. A balance sized in days of volume grows as the volume does.

How Long a Refill Takes

A refill waits in more than one place. Crossing the border is usually the shorter wait, though not everywhere. Money travels through a chain of banks that each hold an account with the next, an arrangement called correspondent banking, and every bank in that chain sets its own deadline. That network has been thinning, with active correspondents falling by 20% between 2011 and 2018 and by 30% in Latin America. A payment into a corridor banks have left can end up routed through third countries, and every extra bank in the path is another deadline to meet.

The longer wait comes after arrival, at the step where a bank in the destination country credits the account the money was meant for. A 2022 study of SWIFT data for the Committee on Payments and Market Infrastructures found that step taking more than 95% of processing time in slower receiving regions such as Northern Africa and Southern and Central Asia. A payment into those regions took a median of more than 22 hours from end to end, against under 15 minutes into North America. Those times leave out the receiving bank’s offline hours, such as nights, weekends and holidays, so the wait on the clock can be longer.

In the illustrative case, a refill sent on a weekday lands the next morning, so $2 million covers Monday to Thursday. One sent on Friday lands on Monday, so Friday morning needs $6 million, and $8 million when Monday is a holiday. Volume never changes across those days, so the calendar alone sets the difference. Remitly’s filings say its prefunding is generally higher before long weekends.

What Prefunding Costs and Who Pays for It

Holding the balance costs money in three separate ways.

• Forgone interest: The balance may earn nothing where it sits. Zepz, the group behind WorldRemit and Sendwave, states in its 2025 accounts that it does not earn interest on its balances with payout partners. A provider that keeps the money in its own bank account in that market holds a deposit instead, which can earn.
• Currency exposure: The balance sits in a currency other than the one the provider reports its results in, so its value in that reporting currency moves. Zepz counted $216.5 million of those balances as exposed to foreign currency risk at the end of 2025. A provider can hedge that exposure, which has a cost of its own, or carry it and absorb the move.
• Funding cost: The capital has to come from somewhere, and borrowing it carries a rate for as long as the balance stays in place. Remitly states that its $550 million revolving credit facility is used primarily to support the prefunding of customer flows, and that its borrowings under it fluctuate with transaction volumes and seasonality.

Providers do not usually list these costs separately on a customer’s invoice. A provider recovers them through its fees or inside the exchange rate it quotes, much as banks pass on the cost of their own foreign balances, as described in The Real Cost of International Wires. None of the filings cited here separates how much of a price covers prefunding.

How Providers Shrink the Balance

A provider has three main ways to put less of its own money in place. Netting cuts how much has to be there, shortening the wait cuts how many days of payouts it has to cover, and post-funding moves the advance onto someone else.

Netting

A provider that also collects payments in the destination market can fund payouts there from what it has collected, so the local currency comes from its own inbound customers and only the difference has to be funded from its capital. It needs a reverse flow in the same currency, at a useful size, arriving before the payouts leave, and many corridors do not have one. Zepz sent money from 39 countries into 82 in 2025, so more than half of its receiving markets are places where it originates nothing running the other way.

Shortening the Wait

The balance covers the wait until a refill lands, so a shorter wait means a smaller balance, and the route the money takes is the part a provider can change. One option is to hold its own account at the destination central bank, which takes the partner’s account out of the path. The Bank of England opened settlement accounts to non-bank payment providers in 2017, and Bangko Sentral ng Pilipinas did the same for electronic money issuers in 2022. Every market needs its own license and central bank approval for that, and the destination’s opening hours stay outside the provider’s reach either way.

Post-Funding

A local partner pays the recipient from its own funds and is reimbursed afterwards, either on credit or against collateral the provider has posted. Western Union states that most of its agents pay recipients first and then obtain reimbursement from the company. The partner is extending credit, so the terms are agreed one partner at a time. At Zepz, post-funding is the smaller side: at the end of 2025 it had prefunded its payout partners $255.4 million gross, while it owed them $35.5 million. In the illustrative case, the partner now fronts the $6 million over the weekend.

These three approaches make the balance smaller or move it to someone else. Paying out only once the sender’s money has arrived removes the balance, and gives up the speed.

How Stablecoin Rails Affect Prefunding

Stablecoin rails act on shortening the wait, and only on part of it. A stablecoin transfer carries value to the destination market in minutes and runs at weekends, so it is an alternative to the correspondent chain for the crossing, while a central bank account of the provider’s own acts on the step after arrival. Crossing the border is usually the faster part of a refill on bank rails, so the gain is largest in corridors that correspondent banks have left and smallest where the wait sits after arrival.

Banca d’Italia sent 200 USDC across ten corridors in March 2026, one retail-size transaction per corridor. The stablecoin transfer took under 15 minutes in seven of the eight corridors in its main comparison. Where instant payment systems stood at both ends, in Italy, Brazil and Argentina, the money reached the recipient in under 20 minutes end to end, while the two South Africa corridors, where the South African leg ran on an ordinary bank transfer, took one to two business days. The local bank transfers at either end decided the outcome.

In the illustrative case, a stablecoin refill sent on Saturday arrives within minutes, but if the payout account can be credited only through a local system closed until Monday, Friday still needs $6 million. If the payout partner accepts the stablecoin and pays out from its own local currency, the provider’s requirement can fall toward one day of payouts, and the partner now holds that currency.

What a provider prefunds with can change as well. Visa announced a pilot in September 2025 letting banks, remittance companies and other institutions fund Visa Direct with stablecoins. Visa says this frees businesses from parking large fiat balances in advance. In October 2026, Visa said the capability had moved into commercial production for eligible clients. Stablecoin prefunding changes what the provider sends Visa. Paying the recipient in stablecoins is a separate Visa product, so where the recipient is paid in local currency, someone still has to hold that currency before each payout.

The Bottom Line

Prefunding is what speed costs in a cross-border payment. A payout that reaches a recipient before the sender’s money has settled is possible only because money is already waiting in the destination country, usually the provider’s own, in the currency that recipient will be paid in. That money has to cover every day until the next refill can land, including days the destination is closed.

Short of giving up speed, nothing removes that requirement. Netting, a shorter route and a partner willing to pay first each make the balance smaller or move it elsewhere. A stablecoin refill shortens the border crossing, but the local currency a recipient is paid in still has to be held by someone before each payout. Who holds that currency, and on what terms, changes what the balance costs, and that cost is recovered in the price. A provider that leaves it with a payout partner may earn nothing on it and carries that partner’s credit risk. One that holds its own account in the market has a deposit that can earn, and carries its bank’s credit risk instead. One that holds an account at the destination central bank waits on no local partner at all, but needs both a license in that market and the central bank’s approval. Asking a provider which of these it uses is a fair question, because the answer helps explain the price it quotes.