Most explanations of cross-border payments start with the payment. It is better to start with the account, because the account is what makes the payment possible. A correspondent account is simply an account one bank holds at another so that money can be moved and settled in a currency it does not issue itself. Understand that account, and the rest of the model becomes far less mysterious.

Nostro and vostro

From one bank's point of view, an account it holds at another bank in a foreign currency is a nostro account — "ours". The very same account, seen from the other side, is a vostro account — "yours". Two names, one relationship, and a great deal of operational work behind it.

Because the balance has to be there before the payment moves, the account is prefunded. A bank that wants reach in several currencies must keep balances at several banks to be ready. That balance is the bank's own money sitting in someone else's books, available the moment an instruction needs to settle. It must be monitored, topped up and reconciled, and the vostro side reflects the identical position from the partner's perspective.

Why banks want fewer of them

Each correspondent account carries cost: idle balances, monitoring, reconciliation and periodic renegotiation. When a relationship ends, the corridor it served can become harder to reach. That is why institutions try to consolidate — to serve the same flow with fewer accounts and less locked capital. Trimming the count is a way of doing more with less, provided the links that remain are dependable.

The reverse idea

Reverse correspondence turns the model around. Rather than each institution holding accounts in many places, a hub holds correspondent accounts for institutions. A participant connects once and reaches the network through that single point. The practical consequences are fewer prefunded balances, fewer bilateral negotiations and one set of rules rather than many.

SUPA is built as that hub: a neutral infrastructure and protocol layer, not a bank and not a competitor for a participant's clients.

In short

  • A nostro is your account abroad; the same account is a vostro for your counterparty.
  • Prefunding is what makes correspondent accounts expensive to hold.
  • Institutions consolidate to reduce locked capital and operational overhead.
  • Reverse correspondence replaces many accounts with one connection point.

Read the architectural argument at /protocol/.