#5: Challenging Liquidity Management in Wholesale Cross-border Payments

23 Sept

22nd September 2022

With:

| Jan Schoombee (Fnality)

In Session #5, Jan Schoombee (Fnality) deconstructs the friction points in the global wholesale payment industry: fragmented post-trade processes, massive capital-in-transit, and high-cost risk management. Traditional correspondent banking relies on a "tiered" system where liquidity is often trapped in fragmented nostro accounts, leading to settlement cycles that can take days.

The discussion centers on Fnality’s vision of a peer-to-peer (P2P) payment system backed by funds held at central banks. By creating a digital representation of fiat—carrying the credit characteristics of central bank money—Fnality enables Atomic Settlement

The session covered:

The Intermediary Problem: Why the current "chain" of correspondent banks creates "dead liquidity" and how P2P DLT models remove these redundant layers.
Fnality’s Design Philosophy: Exploring the build phases of a regulated, DLT-based system that provides real-time finality 24/7.
Single Pool of Liquidity: How banks can manage their global cash and collateral from one central point, rather than parking capital across various jurisdictions and time zones.
The Speed-Risk Paradox: Why accelerating settlement to T+0 usually increases liquidity demand, and how Fnality’s model offsets this through atomic synchronization.
Stablecoins vs. Wholesale DLT: Analyzing whether private stablecoins or crypto assets can ever reach the scale and regulatory trust required for high-value interbank payments.
Balance Sheet Optimization: The results of FNA and Fnality’s collaborative project on calculating the precise liquidity savings for banks adopting on-chain settlement.
Future Evolution: Moving toward a world where the "payment leg" of any trade (securities, FX, or repos) is programmed directly into the asset's lifecycle.