Prefunding vs Liquidity buffer: what is the difference?
Prefunding is money placed at a partner so payouts can go out. A liquidity buffer is the part held above what payouts are expected to need, so the firm keeps paying when flows run hotter than forecast.
| Prefunding | Liquidity buffer | |
|---|---|---|
| In one line | Prefunding is placing money with a payout partner or in a destination-country account before transfers are paid out. Recipients can then be paid without waiting for funds to arrive. | Liquidity buffer means a reserve of cash or highly liquid assets held above expected needs. It lets a firm keep paying when flows turn out worse than forecast. |
| Read more | Prefunding | Liquidity buffer |
How they work together
Most prefunds are expected payouts plus a buffer. The buffer is what covers a holiday in the funding country or a top-up that arrives late.
Where Polynopsis fits
Polynopsis shows the prefunded balance at every payout partner next to the payouts expected against it, so the team sees which partner needs topping up before the batch goes out, not after it fails.
Polynopsis shows how far each balance sits above the payouts expected against it, which is the buffer, and warns before that buffer is used up.
Frequently asked questions
What is the difference between prefunding and liquidity buffer?
Prefunding is money placed at a partner so payouts can go out. A liquidity buffer is the part held above what payouts are expected to need, so the firm keeps paying when flows run hotter than forecast.
What is Prefunding?
Prefunding is placing money with a payout partner or in a destination-country account before transfers are paid out. Recipients can then be paid without waiting for funds to arrive.
What is Liquidity buffer?
Liquidity buffer means a reserve of cash or highly liquid assets held above expected needs. It lets a firm keep paying when flows turn out worse than forecast.
Sources
- Remitly Global, Inc. Form 10-Q for the quarter ended 30 September 2024 · U.S. Securities and Exchange Commission (EDGAR)
- Why is pre-funding required in the money transfer world? · Faisal Khan
- International Money Express, Inc. Form 10-K for fiscal year 2024 · U.S. Securities and Exchange Commission (EDGAR)
- Consultation Paper on Liquidity Buffers and Survival Periods (CP28) · Committee of European Banking Supervisors (hosted by the European Banking Authority)
- Liquidity Regulation and Central Banking (speech by Governor Jeremy C. Stein) · Board of Governors of the Federal Reserve System
- The Payment Services Regulations 2017, regulation 23 (Safeguarding requirements) · legislation.gov.uk (The National Archives)
Know where all your money is.
Polynopsis gives cross-border payment teams one live position across every bank, payout partner, exchange and wallet, including money in flight, and warns before a corridor runs dry.
About Polynopsis
Polynopsis is liquidity management software for cross-border payment companies. The name joins poly, many, and synopsis, a seeing together: one live view of money spread across many banks, payout partners, exchanges and stablecoin wallets, including money in flight, with a warning before any corridor runs dry.
Why it is called Polynopsis · About Polynopsis · Glossary · Corridor runway calculator