Huntington's CHIPS Migration Signals What Corporate Treasuries Are Missing on Prefunded Settlement Costs
When a $285 billion regional bank invests in payment infrastructure explicitly designed to reduce prefunding requirements and accelerate settlement, it is making a statement about where liquidity management is heading. Huntington's decision to join CHIPS, announced as the bank integrates its 2025 acquisitions of Cadence Bank and Veritex, is not a back-office housekeeping item. It is a strategic choice to reduce the capital locked up in settlement processes.
"We just acquired two banks and that added a lot to our footprint," Deepak Kapoor, head of payments products at Huntington, told American Banker. "And we want to improve international payments." The bank is expanding aggressively into Texas, targeting corporate clients who need to move larger sums more reliably. Huntington has added CHIPS to provide an option beyond Fedwire. "We want to make sure our customers are always live," Kapoor said. "They're doing investments, they're closing deals, managing properties. If you can't get instant validation, that's a problem."
The mechanics of CHIPS explain why this matters for liquidity. CHIPS clears and settles $2.2 trillion in domestic and international payments each business day. Its patented algorithm matches and nets payments continuously, resulting in a liquidity efficiency ratio of 26:1, meaning every $1 of funding supports $26 in settled payment value. This allows banks to settle, for example, $2 trillion in average daily payment value with approximately $96 billion in funding, versus an estimated $442 billion if those payments were processed through a traditional real-time gross settlement system.
The CHIPS network provides participating banks with a daily average economic savings of $15.4 million, translating to annualized savings of approximately $5.5 billion. That capital does not vanish, it becomes available for lending, investment, and client financing. For Huntington, joining CHIPS means its treasury can recycle liquidity faster and reduce the operational exposure that comes with longer settlement windows.
The implications extend beyond any single bank's balance sheet. "For years, payment infrastructure was treated as plumbing: necessary and expensive," PYMNTS reported. "But increasingly, financial institutions are approaching it differently, weighing payment architecture as part of liquidity planning, operational continuity and client acquisition." Richard Dzina, senior vice president of core product management at The Clearing House, told PYMNTS that "there was a bit of a hiatus with respect to new participants joining CHIPS during the industry migration to ISO 20022. That is now starting to get realized, and I would suggest Huntington is in the leading wave of an emerging trend with respect to more adds to the CHIPS network."
That trend has accelerated since CHIPS successfully migrated to the ISO 20022 message format in April 2024, aligning it with global high-value payment systems and enabling richer data content for compliance screening and straight-through processing. With the migration complete, banks that had deferred infrastructure decisions are now re-evaluating their options.
For corporate treasuries, the parallel is uncomfortable. Maintaining nostro accounts ties up capital. A bank that wants to offer same-day USD payments needs to keep sufficient dollar balances with its correspondent. Too little liquidity and payments queue up, waiting for funding. Too much and the bank earns minimal returns on idle cash. Treasury teams at global banks spend considerable effort managing nostro positions, forecasting payment volumes, monitoring intraday liquidity, and sweeping excess balances into higher-yielding instruments overnight. This liquidity cost is one reason correspondent banking relationships have declined over the past decade.
Swift estimates that around 35% of the cost of an international payment transaction is related to nostro-vostro reconciliation and liquidity, including the opportunity cost of trapped liquidity. For a corporate treasury managing cross-border flows across multiple banking relationships and currency corridors, that cost is not hypothetical. It manifests as idle balances scattered across accounts that cannot be easily consolidated or redeployed, capital that shows up on the balance sheet but cannot be put to work.
Trapped liquidity describes a situation where capital exists on paper but is not usable in practice. Funds may sit in foreign subsidiaries, restricted jurisdictions, or isolated bank accounts where moving them requires time, approvals, or additional cost. For treasury teams, this creates a mismatch between reported cash and available liquidity. The structural friction is not a failure of individual banks, it is embedded in the correspondent banking model itself.
The infrastructure layer is now evolving in ways that directly address this friction. On June 5, 2026, a group of leading banks announced a digital payments initiative that will connect on-chain activity with traditional payment rails and enable clearing and settlement of tokenized commercial bank money at scale. The solution will combine existing regulatory and settlement frameworks with the programmability of blockchain-enabled financial activity, operated by The Clearing House. "The number one use case that we hear is cross-border," said Sal Karakaplan, chief strategy officer at The Clearing House. He pointed to two recurring client needs: traditional business-to-business payments and multinational corporations that bank with multiple institutions. "The treasurer of that multinational corporation wants to move money in a seamless way."
David Watson, CEO of The Clearing House, said the organization is already seeing where demand is taking shape. "The primary use case we've seen the most traction on so far is higher value movements around the world, particularly intercompany movements." This is precisely the territory where prefunded correspondent models create the most drag, multinational treasury operations moving capital between entities across time zones and currencies.
Huntington's move into CHIPS is a signal, not a solution for corporate treasuries. The bank is investing in infrastructure that reduces its own settlement friction and frees up capital. But the corporate treasury that relies on six correspondent banks across twelve currencies is operating in a model that those banks are actively working to move past.
The question for treasury teams is not whether settlement infrastructure is changing, the evidence is now abundant. The question is whether your current liquidity architecture reflects that change, or whether it is optimised for a correspondent banking model that the banks themselves are treating as structurally inefficient.
References
[2] The Clearing House, "CHIPS,"
[3] The Clearing House, "CHIPS Network Migrates to ISO 20022," April 10, 2024
