> Source: [/docs/resources/guides/prefunding](https://tempo.xyz/developers/docs/resources/guides/prefunding.md) > Section: [Get Started](https://tempo.xyz/developers/get-started.md). Choose a starting point, send a test payment, get testnet funds, connect a coding agent, find the SDKs and CLI, and use the resource guides to plan payment workflows, liquidity, provider selection, and partner integrations. > [Documentation index](https://tempo.xyz/developers/llms.txt) · [Docs skill](https://tempo.xyz/developers/SKILL.md) > Tempo MCP: Use `search`, `find_pages`, `read_page`, and `code` at `https://mcp.tempo.xyz` for Tempo and related documentation. > If an indexed page is missing or reflects an older site, read this site’s [documentation index](https://tempo.xyz/developers/llms.txt) and Markdown pages directly. [Guides](https://tempo.xyz/developers/docs/resources/guides) / [Liquidity and issuance](https://tempo.xyz/developers/docs/resources/guides#liquidity-and-issuance) / Prefunding in payment operations # Prefunding in payment operations Prefunding means making funds available before payments or settlement obligations fall due. A payout provider might hold local currency with a receiving partner so customers can be paid before the provider's next replenishment arrives. The practical goal is to fund reliable delivery without keeping more capital in each account than the payment flow requires. ## Why payment providers prefund Timing mismatches create liquidity needs. Customer payments may arrive on one schedule while recipients expect payouts on another. Providers also need to account for uncertain demand, funding limits, holidays, and unavailable replenishment routes. In cross-border operations, separate currencies and accounts can fragment liquidity. The [BIS report on cross-border liquidity bridges](https://www.bis.org/publications/liquidity-bridges-across-central-banks-cross-border-payments) examines this broader challenge. A balance available in one place may not be available where the next obligation must settle. ## A practical way to size a buffer Start with the period between reliable replenishments. Estimate the net outflows expected during that period, then add a buffer for forecast error, delayed funding, and exceptional demand. Treat contractual minimum balances separately so they do not disappear into an average. For example, a provider expecting $100,000 of net payouts before its next replenishment might reserve another $40,000 for uncertainty. That produces an illustrative $140,000 funding target. It is a planning example, not a recommended reserve or a claim about any provider's requirements. Track these inputs for each funding pool: * Expected and peak net outflows before replenishment. * Available balance after pending payouts and holds. * Replenishment time, including failures and holidays. * Provider limits, required minimums, and available credit. * Currency exposure and the cost of emergency rebalancing. ## Estimating the capital cost An illustrative annual opportunity cost is average funded balance multiplied by an assumed annual funding rate. A $1 million average balance at an assumed 5% annual rate represents $50,000 per year before any interest earned, FX effects, account charges, or operational costs. Use the average balance held over time, not total annual payment volume. For a fuller comparison, add the cost of replenishment, conversion, failed payouts, and operating the alternative. Faster settlement is useful when it improves this complete cost and service picture. ## Where stablecoin settlement can help Tempo can move supported stablecoins with near-instant onchain settlement around the clock. If a receiving provider can use those funds promptly, shorter replenishment times may support a smaller prefunded balance. This is a hypothesis to measure for each flow. A local off-ramp may still require fiat liquidity or process payouts only during supported hours. A wallet transfer does not prove the final bank payment arrived. Moving a buffer from a bank account into stablecoins also changes its custody and issuer exposure. Compare a pilot against the existing flow using average committed capital, replenishment time, failed-payment rate, and time to recipient receipt. The [cross-border payments guide](https://tempo.xyz/developers/docs/resources/guides/cross-border-payments) explains the prerequisites; [nostro and vostro accounts](https://tempo.xyz/developers/docs/resources/guides/nostro-vostro-accounts) explains one common account arrangement. ## Prefunding in payment operations FAQ

Why can a fast payout still require prefunding?

The receiving provider may pay from funds already on hand and replenish them later. Fast recipient delivery does not by itself show that the underlying funding flow is equally fast.

Do stablecoins remove all prefunding?

No. They can shorten an onchain funding leg, but conversion, bank payouts, contractual balances, and operational buffers may still require capital ahead of demand.

How should a team measure reduced prefunding?

Compare average committed capital and service performance for the same payment flow before and after the change. Include funding, conversion, custody, and operational costs.