What is a benefit of correspondent-respondent relationships in Faster Payments?

A primary benefit of correspondent-respondent relationships in Faster Payments is the reduced need for liquidity management for respondents. In these relationships, a larger financial institution (the correspondent) provides services and access to payment networks for smaller institutions or entities (the respondents). This setup allows respondents to leverage the correspondent's established liquidity lines and payment infrastructure, thereby alleviating their own liquidity needs.

When respondents can rely on their correspondent for funding and processing transactions, they do not have to maintain high levels of liquidity on hand to settle payments. This can lead to more efficient capital utilization, as funds can be employed in other productive areas instead of being tied up in maintaining liquidity for transactions. This relationship fosters increased efficiency in payment processing and can encourage faster settlements and more reliable access to funds.

The contrary options suggest outcomes that do not align with the fundamental objectives of establishing correspondent-respondent relationships, such as the intention of reducing costs and improving efficiency in payment models.