Elastic Infrastructure: A Historical Perspective on Credit in Global Correspondent Banking and the Cross-Border Payments System

Financial technology (fintech) innovations have the potential to disrupt traditional banking by unbundling banking, money, and payments. However, the impact on the cross-border payments system—which still relies on correspondent banking networks—remains uncertain. This uncertainty partly stems from a historical focus in the literature on cash clearing over credit. Challenging this distinction, this article explores the role of credit in correspondent banking and international payments. A longue durée perspective on cashless payments reveals the deep-rooted importance of credit in the cross-border payment system and highlights correspondent banks’ role in providing it. Changes in bank-intermediated trade finance practices during and after World War I reshaped the London-based correspondent banking network. Furthermore, cash clearing and credit operations remained remarkably congruent until at least the 1980s, as reflected in banks’ internal organisation, reporting, and bankers’ own descriptions of the payment system. This article argues that adopting a definition of payment system infrastructure that integrates both dimensions is essential to understanding how correspondent banking has facilitated international liquidity provision. It also suggests that relying on fintech firms, rather than banks, to provide this elastic payment infrastructure could amount to jumping out of the frying pan and into the fire.