Prefunding
Plain definition. The European Central Bank’s policy on prefunding for its TARGET payment system defines prefunding as a practice where an ancillary system participant places funds in central bank money under the control of the ancillary system for settlement purposes.
Technical definition. In the European Central Bank’s policy for its TARGET payment system, prefunding is defined as a practice where an ancillary system participant places funds in central bank money under the control of the ancillary system for settlement purposes. Once moved to the ancillary system’s account, the funds are typically uncommitted and freely available to the participant, and the transfer does not serve to discharge settlement obligations that have already been established. Prefunding can take place via an RTGS Dedicated Cash Account, the RTGS AS settlement procedure D, a TIPS technical account or, in theory, other technical settlement models.
On this site
On this site, Prefunding comes up in How does Ripple’s On-Demand Liquidity (ODL) use XRP?, Is the cross-border prefunding problem real, or Ripple marketing? and Is using XRP for cross-border payments actually cheaper?.
Source
October 2023 (ecb.europa.eu), read October 1, 2026.