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By Annabelle Huang
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Much of the banking industry appears remarkably comfortable with the status quo in payments. Despite years of discussion about modernization, most cross-border transfers still rely on decades-old rails like SWIFT. We don’t see any structural changes, only incremental upgrades. To be fair, a small minority of innovative bankers do see stablecoins (digital currencies pegged to government-issued currencies like the U.S. dollar) as a way to make payments faster and cheaper. But even then, their ambition is too limited.
As new technologies reset expectations around transaction speed, the banking sector faces a narrowing window to modernize its infrastructure. The truth is that matching Bitcoin or Ethereum’s settlement times (which are still way ahead) isn’t going to be enough.
If banks want to remain relevant in global payments, they should be building infrastructure that blows public blockchains out of the water. The advantages from a liquidity and efficiency perspective are numerous. Failing to take action, however, could permanently erode the banking sector’s role in global value transfer.
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Difference Between Messaging and Value Transfer
SWIFT is often described as a payment network, but that is a misnomer. SWIFT does not move money; it sends messages. Those messages instruct banks to update their ledgers, debit accounts, credit counterparts and reconcile balances across a chain of intermediaries. The actual movement of value happens later, after a sequence of confirmations and ledger updates.
That delay—which can range from hours to several days—is an architectural feature of correspondent banking.
Stablecoins, by contrast, promise sub-second settlement times. In theory, the message and the value move together. When a stablecoin transaction reaches finality on a ledger, ownership transfers immediately and irreversibly. There is no daylight gap between instruction and execution, no period of limbo when both parties wait to see whether funds actually arrive.
In practice, however, most public blockchains still fall short of this promise. Settlement times vary depending on the chain. Some networks deliver fast, low-cost transfers; others are slow, unpredictable and expensive. The same stablecoin transaction can take milliseconds to confirm on one chain and many minutes on another.
Once settlement stretches into minutes, the system begins to resemble SWIFT again, even if it’s more efficient. Institutions must manage pending transactions, account for delays and maintain buffers to cover uncertainty. Sub-second finality is what turns a blockchain from a notification layer into a true value-transfer layer.
Liquidity Efficiency and Capital Release
The greatest hidden cost of today’s cross-border payment system is trapped capital. Under the correspondent banking model, institutions must pre-fund nostro and vostro accounts across dozens of jurisdictions. Liquidity sits idle “just in case” a payment needs to clear quickly in a given currency corridor.
Collectively, this ties up hundreds of billions (possibly trillions) of dollars that could otherwise be deployed productively.
Instant stablecoin settlement changes that equation entirely. If value can move across borders in real time, the need for widespread pre-funding largely disappears. The banking sector could operate with a unified pool of digital liquidity instead of fragmented balances scattered around the world.
The implications are profound. Treasury desks could move from static buffers to just-in-time liquidity management. Smaller banks could participate in global flows without maintaining extensive correspondent relationships. Capital becomes composable: a digital dollar can be reallocated instantly to wherever demand arises.
But this efficiency only materializes if settlement is effectively instantaneous. Any meaningful delay forces institutions to maintain safety buffers against pending transactions, recreating the very inefficiencies stablecoins are meant to eliminate.
Reduced FX Friction and Balance Sheet Noise
Foreign exchange is another area where slow settlement imposes invisible costs. In today’s system, a cross-border payment often involves message transmission, FX conversion, intermediary settlement and eventual reconciliation. All of these unfold over a period of days. During that window, exchange rates move, accounting entries diverge and reconciliation teams scramble to align books across jurisdictions.
Instant settlement collapses this complexity into a single atomic event. Currency conversion, ledger update and delivery can occur simultaneously. The FX rate is locked at execution. There is no multi-day exposure to market movements.
For multinational firms moving billions across borders, this means lower operational costs and reduced need for hedging against short-term FX volatility. Cleaner settlement produces cleaner balance sheets.
Competitive Reality Check
Finally, there is a simple market truth: users already have access to systems that settle far faster than traditional banking rails.
Crypto networks move stablecoins in seconds or less. Fintech platforms offer near-instant transfers within their ecosystems. Central bank initiatives like FedNow in the United States or PIX in Brazil have normalized real-time payments domestically.
Against this backdrop, incremental improvements are not enough. If the banking sector offers stablecoins that settle in minutes, or that require off-chain reconciliation to achieve finality, it will not stop the migration of volume to alternative rails. It will merely confirm that better options exist elsewhere.
To retain trillions of dollars in institutional flows, the banking industry must deliver better payment performances than public blockchains. True instant settlement is the threshold at which that superiority becomes undeniable.
Banks are uniquely positioned to achieve this. They have regulated balance sheets, trusted issuance and deep liquidity. If they pair those advantages with infrastructure designed for real-time execution, they can build payment systems that truly outperform public blockchains. They can redefine settlement in the digital age—or watch others do it first.
Annabelle Huang is the co-founder and chief executive officer of Altius Labs, a blockchain infrastructure company backed by Founders Fund and Pantera Capital that focuses on solving execution performance bottlenecks.
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