Money can move at 2 a.m. on Sunday. The systems needed to fund, convert, settle and account for that flow of funds may have another schedule.
Three developments last week illustrate the timing variances. Seven U.K. banks completed the first live customer transactions using tokenized sterling deposits, including two remortgage completions and a consumer marketplace purchase, as PYMNTS reported.
The European Central Bank launched Pontes, a new tool which allows wholesale tokenized-asset transactions to settle in central-bank money. PYMNTS detailed that the ECB plans to add features and longer operating hours gradually, with full implementation expected by 2028. SoFi and Mastercard also made SoFiUSD settlement live for SoFi Bank’s debit and credit card program. SoFi said it is migrating the program to settlement using SoFiUSD. The program is expected to process more than $25 billion in annualized volume.
The headlines put several forms of money onto blockchain or tokenized infrastructure without putting every part of a transaction onto the same clock.
1. A Payment Can Run 24/7 While Its Funding System Does Not
The difference already exists without blockchain.
FedNow processes payments continuously, including weekends and Federal Reserve holidays. One business day rolls into the next at about 7:01 p.m. ET without interrupting processing, so FedNow can settle a payment at 3 a.m. Saturday or 4 p.m. Sunday.
Fedwire has a different schedule. Its funds-transfer business day runs from 9 p.m. ET on the preceding calendar day until 7 p.m. ET, and Saturday and Sunday are not funds-transfer business days. A bank using an always-available payment rail has to consider whether it can reposition liquidity through other systems when the payment arrives.
2. FX Introduces Another Clock
Consider a company receiving a dollar-denominated digital payment on Saturday but needing euros. The dollar payment may arrive immediately, but converting it still depends on available FX liquidity and counterparties. Continuous movement of one currency does not guarantee equally continuous conversion into another.
As PYMNTS reported in August, faster cross-border payments leave treasury departments deciding when to convert currencies, how much liquidity to maintain and where to hold it.
3. Central-Bank Settlement Has Operating Hours, Too
Pontes puts the timing issue into the tokenized-asset market.
The ECB said Pontes allows wholesale tokenized-asset transactions to settle in central-bank money, with longer operating hours to be introduced gradually.
T2, the Eurosystem’s large-value settlement system, operates 22.5 hours on weekdays, while TIPS processes instant payments 24/7 year-round. The ECB said in May that it plans to introduce a short T2 settlement window on most weekends to help participants manage liquidity for TIPS. The ECB’s roadmap described the planned window as lasting one to two hours and said the Eurosystem will explore extending it to TARGET closing days.
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A tokenized asset, instant-payment system and large-value central-bank settlement system may have three different operating schedules. Pontes connects tokenized markets to central-bank money, but it does not immediately eliminate those differences.
4. Reconciliation Has Its Own Timetable
A payment can settle before a company’s books record what happened.
SoFi Tech Solutions’ card-processing documentation provides a conventional example. Mastercard Banknet sends clearing batch files every two hours, while interbank and ATM networks send files once each morning. SoFi Tech Solutions’ systems match the clearing message with the pending authorization and change the transaction to settled.
Corporate systems give rise to another timing difference. ERP, treasury management and accounting processes can still rely on scheduled files or business-day workflows even when payments arrive continuously.
Recent PYMNTS coverage of real-time B2B payments found 79% of businesses surveyed said instant payments improve cash-flow management and 76% cited more efficient reconciliation.
5. Conditional Payments Change When Money Moves
The U.K. tokenized-deposit transactions show another use of the clock.
In two remortgage transactions, deposit funds were locked and automatically released when the property transaction reached completion. In the marketplace transaction, money was locked in the buyer’s account and released after the goods were exchanged.
The continuum of money flow shows funds reserved at one time and released when a specified event occurs. The arrangement also requires rules for what happens when the condition is not met.
That issue will extend beyond individual pilots. PYMNTS reported last week that The Clearing House’s planned On-Chain Money Initiative is designed to support immediate and conditional payments while connecting with existing fiat payment systems.
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