How do agents connect to global capital flows?

Author: Payment201

In the past decade, the global payment industry has undergone tremendous changes. Payment methods are becoming more diverse, APIs are becoming more open, cross-border transfers are getting faster, and Stripe, Adyen, Wise, PayPal, and Stablecoin are continuously changing the payment experience. More and more practitioners believe that the future of global payments will be increasingly open, decentralized, and more like the internet.

However, if we observe from the underlying flow of funds, we will find a completely different trend: payment gateways are opening up, but the underlying funds are being re-concentrated.

In 2025, the daily trading volume of the global foreign exchange market is approximately: $9.6 trillion. The dollar accounts for about: 89% of one side of foreign exchange transactions. The US CHIPS processes over: $2 trillion in dollar payments daily.

But what truly supports these fund flows is not thousands of companies. Rather, it is a small number of:

• Global Transaction Banks;

• Core Clearing Systems;

• Liquidity Providers.

The real power center of global payments is not on the Checkout page.

It lies in:

Who can connect to another Balance Sheet.

This is Correspondent Banking.

It has no consumer brand, no beautiful app, and many payment practitioners may not directly interact with it.

But it determines:

• Whether a bank can enter the dollar system;

• Whether an African bank can connect to global trade;

• Whether a cross-border company's funds can ultimately return to the headquarters Treasury.

This is also why: Stripe is becoming more like a bank, and Stablecoin is getting closer to financial infrastructure. Institutions like JPM and Citi still stand at the core of the global fund network.

Because the real competition in global payments has never been just about payment gateways.

It is about: who has the ability to connect to the global financial system.

1. What truly moves in global payments is not information, but bank liabilities

When many people think of global payments, the first things that come to mind are: SWIFT, Visa, Mastercard, Payment Gateway. But these mainly address: how payment information is transmitted.

The real difficult question is: Where is the money?

This is one of the biggest differences between the internet and the financial system. The internet transmits information; the banking system moves: the liabilities of financial institutions.

If you have $1 million in your JPMorgan account, essentially: JPMorgan owes you $1 million. If a Nigerian bank's customer account shows $1 million, that bank must also have corresponding dollar assets or dollar positions on its asset side.

Therefore, the real issue in cross-border payments has never been:

"How does Bank A tell Bank B that I want to pay $1 million?"

But rather:

Where is this $1 million currently on which Balance Sheet? How does it move to another Balance Sheet?

Assuming a Nigerian bank needs to pay a Chinese supplier in dollars, it can send a SWIFT message.

However: if it does not have a US branch; is not a direct participant in the dollar core clearing system; cannot directly access dollar liquidity; it still needs a large bank to connect to the global dollar system.

Thus, the funding chain may become:

This is Correspondent Banking.

Many people understand it as: "Banks helping each other transfer funds," but this understanding is too shallow.

What Correspondent Banking truly provides is:

Balance Sheet Access.

A Global Transaction Bank provides not just accounts.

But a complete set of financial capabilities:

• Clearing Access;

• Liquidity;

• FX;

• Payment Routing;

• Intraday Credit;

• AML;

• Sanctions Screening;

• Regulatory Infrastructure.

More importantly:

Institutional Trust.

APIs can be purchased, systems can be developed. However: whether a global bank is willing to let your funds enter its Balance Sheet; whether it is willing to allow your customers to use its financial network; whether it is willing to bear your transaction risks; these are completely different questions.

Therefore, what is truly scarce in global payments has never been: "Is there a payment interface?"

But rather: Is there a financial institution willing to connect with you.

2. What truly determines the value of a payment network is not how many countries it covers, but which nodes it connects

This is also the core behind the previous Payment201 article about the value of JPM accounts.

Many companies understand bank accounts as: I want an account, I want to receive and make payments, I want online banking. But large enterprises see it completely differently. The true value of an account is not the Account Number.

But rather: what network it connects to. Including:

• Which currency system;

• Which clearing systems;

• Which banks;

• Which liquidity providers;

• Which countries and regions.

So:

A regular bank account is just an account. A top-tier Transaction Bank account is an entry point into the global financial network.

J.P. Morgan disclosed that its global clearing network connects over 4,000 Correspondent Banking Partners, covering more than 160 countries.

The real value of this number is not: "JPM has many partner banks."

But rather:

Network Effects.

Assuming: Bank A needs to pay Bank B.

The ordinary path:

![](https://public.chaincatcher.com/upload/image/20260808/1786200971504-654463.webp)

If both are connected to JPM:

![](https://public.chaincatcher.com/upload/image/20260808/1786200999820-461811.webp)

If both accounts are even within JPM:

A Book Transfer could be completed directly.

Funds do not need to actually pass through multiple banks; they are simply readjusted within JPM's Balance Sheet.

Why is this important?

Because each additional intermediary node may increase:

• Fees;

• Compliance checks;

• Data conversion;

• Repairs;

• Settlement time;

• Liquidity usage.

Therefore, one of the truly important metrics in global payments is not: Coverage. But rather: Path Length.

3. How global payment networks are established: Why remittance companies seek local Direct Partners?

There is another frequently misunderstood issue in the global payment industry: How does a payment company truly enter a new market? Many companies will promote: "We cover over 200 countries."

But for payment infrastructure:

Coverage and Connectivity are not the same thing.

Adding a country on the map does not mean truly having payment capabilities in that market. Because the truly important question in a market is not: "Can I receive a payment?"

But rather: Can this payment stably enter the local financial system and ultimately complete settlement?

When entering a new market, payment companies typically have several paths.

The first: Establish local capabilities themselves.

Including:

• Applying for licenses;

• Building teams;

• Connecting banks;

• Establishing local operational systems.

Advantages: Strong control.

Disadvantages: High costs, long cycles, complex regulations.

The second: Rely on large international bank networks.

For example: Entering the local market through a Global Transaction Bank.

Advantages: Strong stability, strong compliance capabilities, strong funding capabilities. But: Limited coverage and flexibility.

The third: Find local partners that truly have financial connectivity capabilities.

This is also the main model for many global payment network companies. For example, global payment infrastructure companies like Thunes and Nium, when expanding into different markets, do not simply pursue: "Adding a country on the map."

What is truly important is to find:

• Local banks with direct connections;

• Local clearing capabilities;

• Local currency liquidity;

• Regulatory understanding;

• Stable settlement capabilities.

Because: Whether a market is truly covered does not depend on whether it lights up on the map. But rather on: whether funds can truly come in, whether they can truly go out, and whether they can stably complete settlement.

Thus: The value of a global payment network does not come from how many countries it covers, but from what financial infrastructure is connected behind each country.

For example: A payment network can promote coverage of a certain country.

But if: Receiving payments requires going through multiple intermediaries; funds need to go through complex routing; settlement relies on multiple third parties; then the commercial value of such coverage is actually limited.

What is truly valuable is: Direct Connectivity.

This is also an important change happening in the global payment industry: In the past, the competition was about who covered more countries; in the future, the competition will be about who connects deeper. Because payments are ultimately not a map business, but a network business.

4. Another change behind the global financial network: The Chinese banking industry is accelerating globalization

When studying Correspondent Banking, I also thought of a recent deep observation. In July of this year, I had a conversation with a deputy head of a domestic bank at a dinner, and during the chat, he mentioned something that left a deep impression on me: The layout of the Chinese banking industry in overseas markets is much deeper than many people imagine.

In the past, many people understood banks going overseas as: opening an overseas branch, serving local customers, helping Chinese enterprises go global. But in reality, in the global financial network, banks have another very important role: correspondent banks.

This bank leader mentioned that they are promoting agency banking-related businesses in markets including Afghanistan, Iraq, and parts of Africa. These markets may not be as mature as Western financial centers. But for global trade and fund flows, they still need to connect to the international financial system.

And the role banks play in this may not always be the same.

Sometimes: it requires landing through a local branch.

For example:

• Establishing local institutions;

• Obtaining regulatory approvals;

• Serving local customers.

Sometimes: it does not necessarily require a physical presence.

But rather as: a liquidity provider or a correspondent partner.

Providing:

• Clearing capabilities;

• Currency liquidity such as RMB;

• Cross-border settlement capabilities;

• Risk management capabilities.

This actually reflects the different layers and positions within banking operations.

The global financial network is not: who has the most branches, who is the strongest.

What is truly important is: a bank's position in the global fund network.

• Some institutions are responsible for: connecting local markets.

• Some institutions are responsible for: providing clearing capabilities.

• Some institutions are responsible for: providing liquidity.

• Some institutions are responsible for: undertaking global fund allocation.

Different roles together form the infrastructure for today's global fund flows.

At the same time, we also see more and more overseas banks joining the RMB cross-border clearing system. For example: regional large banks like Standard Bank are strengthening their connectivity capabilities related to RMB internationalization. The logic behind this is not simply to add a payment currency. But rather: more financial nodes are beginning to connect to the new fund network.

In the future, global payment competition will not only be about connections within the dollar system. But rather: between different currency systems, who can establish a more efficient and stable settlement network.

This also reaffirms a viewpoint:

Correspondent Banking has not disappeared.

It is changing.

From traditional agency banking relationships, it is gradually evolving into: a connection layer between global currency systems.

5. The most counterintuitive change in global payments: More transactions, but fewer core nodes

If Correspondent Banking is so important, why do large banks not continue to expand their agency networks?

The reality is quite the opposite.

In the past decade, an important trend called: De-risking.

Many large banks actively reduce:

• High-risk markets;

• Small financial institutions;

• Correspondent relationships with low commercial value.

Why? Because maintaining an agency banking relationship is very costly.

Including:

• KYC;

• AML;

• Sanctions;

• Transaction Monitoring;

• Audit;

• Data Governance;

• Regulatory Review;

• Operational investment.

A large portion of these are fixed costs.

However, a small market with a population of several hundred thousand may only contribute limited revenue in a year. Thus, banks will calculate: What is the revenue generated by this relationship? What are the potential regulatory risks? Is the risk-adjusted return reasonable?

If: the revenue is limited and the risk is huge, the most rational choice may not be to raise fees. But rather: to exit.

This is where De-risking truly changes things; it does not change how much a payment costs, but rather: the structure of the global financial network.

In the past: many banks directly connected to many global banks.

Now, more and more are becoming:

As a result: Edges decrease, Hubs strengthen.

Thus, institutions like JPM, Citi, HSBC, and Standard Chartered see their value further increase. Because they possess:

• Global clearing capabilities;

• Multi-currency liquidity;

• Rich correspondent networks;

• Long-term financial trust.

This forms one of the biggest contradictions in today's global payments:

Payment gateways are decentralizing, but financial settlements are re-centralizing.

There are more and more Stripes, more PSPs, and a richer variety of Payment Methods.

But the institutions that truly possess:

• Dollar liquidity;

• Core clearing capabilities;

• Global balance sheets;

• Financial trust;

have not increased in tandem.

The technological barriers are lowering, but the barriers of institutional trust have not.

Therefore, the core of future global payment competition is not just: who has more users, who supports more Payment Methods.

But rather: who has the ability to connect to the global financial system (partners).

6. On the surface, payments earn fees, but at the core, the real competition is for Balance Sheets

If you are a bank that needs to complete $10 billion in payments daily, what do you care about more? A $1 discount on each wire? Or: locking up $2 billion in cash?

For large financial institutions, the answer is usually the latter. Because funds themselves have a cost.

Many people focus on payment infrastructure in terms of:

• Fees;

• Speed of arrival;

• API stability.

But at the level of global Transaction Banks, the real competition is about:

Liquidity Efficiency.

In 2025, the US CHIPS will process over: $2 trillion in dollar payments daily on average. But the real importance of CHIPS is not just its processing scale. More critically, it is how it utilizes limited liquidity to complete settlements far exceeding the actual fund scale.

Because if a bank needs to process $10 billion in payments daily, it does not mean it is willing to lock up $10 billion in cash in advance.

These funds could originally be:

• Loaned out;

• Invested;

• Used for market making;

• Supporting other clients;

• Serving as a liquidity buffer for the group.

If a large amount of funds is long-term tied up in:

• Nostro Accounts;

• Settlement Accounts;

• Prefunding Accounts;

it essentially leads to a decrease in asset utilization efficiency.

Therefore, large payment infrastructures focus on:

• Prefunding costs;

• Netting efficiency;

• Intraday liquidity;

• Settlement finality;

• Balance Sheet usage.

This is also why:

Fintech and Transaction Banks see "payments" as two different worlds.

• Fintech focuses on: APIs, conversions, checkouts, payment fees,

• Transaction Banks focus on: liquidity, balance sheets, settlements, risks.

So in reality, everyone is talking about how banks are the primary party in the cross-border payment industry, which is indeed the case, because the payment industry superficially earns fees, but at the core, the real competition is for Balance Sheets.

When transaction volumes reach tens of billions or hundreds of billions: occupying a few percentage points of funds may be more valuable than reducing a few basis points in fees. This is also why as payments move further down the stack, they get closer to: Treasury, and not just Payment.

7. What truly makes emerging markets difficult is often not Collection, but Exit

Africa is one of the best markets to understand this issue. In recent years, the world has focused on African payment innovations: Mobile Money, Wallets, Instant Payments, QR Payments, Local Acquiring. These are certainly very important.

But from another perspective: from the position of a multinational company's Treasurer.

The problem becomes completely different.

Assuming a Chinese company operates in Africa.

Consumer payments:

• Kenya: KES.

• Nigeria: NGN.

• South Africa: ZAR.

Payments are successful, orders are completed, and consumer experiences are great.

But for the headquarters, the real problem has just begun.

The headquarters needs to consider:

• What to do with these local currencies?

• Can they be converted to USD?

• What is the FX rate?

• Is there enough dollar liquidity?

• Are there foreign exchange restrictions locally?

• Can funds be legally remitted out?

• Should it ultimately return to Hong Kong?

• Singapore?

• Or the headquarters Treasury Center?

• Does the local bank have a stable correspondent relationship?

So:

Completion of payment does not mean completion of fund circulation.

This is also a problem that many payment companies easily overlook. Consumer payments are just the first step. The truly complex issue is: how local currencies re-enter the global financial system.

Collection is just the first kilometer; Treasury Exit is the deep water zone.

A simple example: A wallet company has: 10 million users, processing a large number of local currency transactions daily. From the consumer's perspective: it is a huge payment platform.

But if a corporate client requests: to convert $10 million worth of local currency into dollars daily and remit it back to headquarters.

The problem immediately becomes: Who provides FX? Who provides dollar liquidity? Who bears the local currency inventory? Who connects to international banks? Who completes the final settlement?

This is no longer a payment issue. But rather: a financial infrastructure issue.

This is also why studying African payments will ultimately encounter:

• Standard Bank;

• Standard Chartered;

• Citi;

• HSBC;

• Regional large banks.

Because:

• Wallets solve: how consumers make payments.

• Transaction Banks solve: how local money re-enters the global fund network.

These two issues are completely different. The payment industry often focuses on: the first kilometer. That is: how money enters the platform. But what truly large enterprises care about is: the last kilometer. That is: how money leaves the market. This is also an important direction for future competition in emerging market payments.

8. Stablecoin solves Settlement but does not automatically solve Liquidity

Stablecoin may be one of the most impactful variables on traditional cross-border payment systems in recent years. It indeed changes some things:

• 24/7 Settlement;

• Faster fund movement;

• Reduced cut-off restrictions;

• Fewer intermediaries;

• Enhanced programmability of funds.

So many people ask: Will Stablecoin replace Correspondent Banking? I believe the answer is not that simple.

Because Correspondent Banking actually contains multiple different layers.

First Layer: Transport.

How money moves from A to B. Stablecoin excels at this layer.

Second Layer: Settlement Asset.

What asset is ultimately used for settlement. Stablecoin also has clear advantages.

Third Layer: Liquidity & FX, here the issues are completely different.

For example: A company has: 1 billion NGN. It wants to obtain: $10 million USDC.

The real question is: Who is willing to buy NGN? At what price? Who bears the NGN inventory? Who provides dollars? Who bears the FX risk?

This is not a problem that blockchain technology itself can solve.

But rather: a financial market problem.

Fourth Layer: Access & Compliance

Who is allowed to enter this system? Is the funding legal? Is regulation allowed? Does the transaction comply with local rules? So Stablecoin truly changes the: Settlement Layer. But it does not automatically solve the: Liquidity Layer.

This is also a core misunderstanding in many current discussions about Stablecoin: treating settlement innovation as liquidity innovation.

Blockchain can allow an asset to move very quickly. However: Blockchain does not automatically create liquidity for another currency. For example: USDC moving from Singapore to Dubai may complete in seconds. But: How does 1 billion NGN become USDC? How does USDC ultimately become RMB? Who provides the intermediate liquidity? These questions still exist.

Stablecoin is not a replacement for the financial system; it is more likely redesigning the Settlement Layer within the financial system, such as BIS's Project Agorá, SWIFT-led ledgers, Citi token service, and JPMD are in this direction, making bank assets flow more efficiently.

In the future:

Banks will continue to provide:

• Balance Sheets;

• Liquidity;

• FX;

• Compliance;

• Trust.

New technologies will be responsible for:

• Moving assets faster;

• Lower settlement friction;

• Higher automation.

Banking relationships will continue to exist, but settlement rails will begin to be redesigned.

Conclusion: What is truly scarce is not payment, but connection

Returning to the numbers at the beginning of the article. The global foreign exchange market: $9.6 trillion daily. Dollar participation: nearly 90%. CHIPS: processing over $2 trillion daily.

But the core nodes that truly connect these funds are only a few. Meanwhile: payment methods are becoming more diverse, APIs are becoming more open, Stablecoin is maturing, and cross-border payment speeds are increasing.

Thus, the real competition in global payments is no longer just: how money moves. But rather: who can provide: liquidity. Who possesses: balance sheets. Who bears: risks. Who has: access. Who gains: trust.

The three most important keywords for future global payments:

• Liquidity

Without liquidity, no matter how good the technology is, value exchange cannot be completed.

• Trust

Without trust between financial institutions, no matter how fast the technology is, it cannot enter the mainstream system.

• Access

Without the ability to enter the core currency system, no matter how good the product is, it can only remain in local markets.

In the next decade: Stablecoin will change payments, Tokenized Deposits will change payments, Instant Payment Networks will change payments. But they are more likely to redesign the global fund network rather than make this network disappear.

So what is truly happening in global payments may not be: technology companies replacing banks. But rather: payment companies continuously banking, and banks continuously technologizing.

Stripe is becoming more like financial infrastructure, and banks are becoming more like technology companies. Ultimately, both sides are competing for the same capability: who can connect the money in different financial systems globally with the lowest capital cost, shortest path, and highest certainty.

Payment methods are just the surface; APIs are just the entry.

What truly determines the global payment landscape is:

• Balance Sheets.

• Liquidity.

• Financial Connectivity.

This is the real reason why Correspondent Banking, after more than a hundred years of existence, still deserves to be re-examined.