A Prefunding Account is required to pay in advance for transactions processed by a bank or an e-money institution. It is most commonly used for managing international money transfers instantly or with very little delay.
When a user sends money from one country to another, the regular but inefficient way to handle this process is to push the funds from the payer’s account in Country A to the beneficiary account in Country B and then pay out the money. This can take a couple of days and is rather inconvenient.
But, as long as the financial institution handling the transfer has its own money in its prefunding account in Country B, they can release the money and the payment to the beneficiary account can be finalized instantly! This is very convenient for the sender and the recipient, and a great value proposition for the financial institution.