Major financial institutions are developing new payment systems to address a persistent business problem: moving money across borders quickly enough to pay bills when needed, without tying up excess cash.
On September 5, DBS and Citi's New York office completed a dollar payment between Singapore and the US in minutes using tokenized deposits through SWIFT's digital ledger, according to DBS's announcement. Tokenized deposits record bank deposits as digital tokens that can be transferred through participating payment systems.
The Cost of Waiting
International payments typically require multiple banks to coordinate, and while payment instructions travel quickly, the actual settlement of funds takes longer. This delay creates costs for businesses. A company that deposits $10 million two days early to ensure payment certainty faces borrowing costs of approximately $2,740 for those two days at a 5% annual borrowing rate, according to the article's calculation. Across many accounts and repeated payments, these extra balances accumulate into significant expenses.
Faster transfers could allow companies to keep less money waiting in each location, reducing these costs and freeing up capital for other uses.
Two Approaches to Digital Money
Banks are pursuing tokenized deposits as one option, while 21 different financial institutions announced a separate stablecoin initiative in September. Both approaches aim to keep customers' money and the fees associated with managing it.
Tokenized deposits maintain traditional banking relationships: the bank remains the entity that owes the customer the money, with the token recording that obligation in a digital form. Reserve-backed stablecoins work differently, with issuers holding assets to support token value and redemption.
The 21-institution stablecoin group plans a dollar offering in the first half of 2027, with other G7 currencies considered longer-term ambitions. The announcement did not disclose how members would divide future income.
Competitive Challenges Ahead
Existing payment systems already offer some of these capabilities. The European Central Bank's TIPS service provides around-the-clock settlement for supported currencies. New token-based services will need to compete on the routes they cover and their total cost.
Cross-border payments also depend on what happens at the receiving end. Currency conversions may still require waiting, and different recipient banks may not accept the same tokens, requiring intermediary connections or additional account management.
For banks, the development of faster digital payments represents an opportunity to retain customer relationships and the recurring fees associated with international money management. The success of these systems will ultimately depend on whether money becomes spendable where businesses need it, at competitive prices, with reliable support when transfers fail.
