Prefunding is the quiet tax on cross-border operations. To move money reliably, treasuries park working balances in each corridor so that payments do not fail when timing or liquidity slips. The pattern is safe but expensive: capital sits idle, scattered across currencies and accounts, delivering no return. The example below is illustrative, not a forecast, but it shows the mechanism clearly.

The cost of scattered balances

Imagine a treasury that keeps large working balances spread across several corridors. Each balance exists to absorb timing gaps in one direction. Most of it is never used at once, yet all of it must be available. The result is a substantial pool of low-yielding, fragmented liquidity that is difficult to redeploy and harder to see as a whole.

What netting does

A netting hub changes the starting point. Approved operations enter a single order book where offsetting flows cancel internally. If bank A sends €10m and participants B and C receive €8.5m, only €1.5m leaves the hub. Because fewer funds actually cross borders, less capital must be prefunded to guarantee reliability. In the illustrative case, the balance that must be held falls accordingly, since a smaller share of flows crosses borders.

Making the remainder work

The second half of the argument is what happens to the balance that remains. Capital held inside a netting perimeter is touched more often and for shorter periods, and the hub supports internal FX between participants — so balances can be concentrated rather than duplicated per corridor. Concentrated liquidity is easier to manage, easier to observe and more straightforward to put to productive use within policy.

What this does not promise

Netting reduces the balance that must sit idle; it does not remove liquidity management. Corridor-specific constraints, deadlines and counterparty limits still apply, and results depend on the actual flow pattern of each treasury. The mechanism is architectural, and the benefit scales with how much offsetting activity a participant generates.

In short

  • Prefunding locks capital in every corridor at once.
  • A single order book cancels offsetting flows internally.
  • Less money crosses borders, so less must be prefunded.
  • Remaining balances can be concentrated and put to use.
  • The example is illustrative; results depend on each participant's flow.

See how treasury and finance teams use the network at /institutions/.