Inside Fipto’s Ledger System

The future of payments is already here thanks to blockchain: instant settlements, 24/7 availability, secure and transparent transactions, and lower fees. Yet many financial institutions still struggle with legacy systems that weren't built for this new reality. We now have two very different currency types which need to be consolidated and manipulated; which implies rethinking how a typical ledger has been working for dozens of years.

At Fipto, we knew that bridging traditional and digital currencies would require more than just adapting a standard ledger system—it required a completely fresh approach. In this article, I will explain how we built a next-generation ledger that can handle both fiat and digital currencies seamlessly, enabling businesses and financial institutions alike to step confidently into the future of payments.

What is a ledger, and why does it matter?

Before going through the characteristics of Fipto's ledger, let’s first start by explaining what is a ledger and why it is at the core of how a fintech operates.

Overview

At the heart of every fintech beats a critical system that few people ever see, yet everyone depends on: the ledger. It tracks and records every single financial transaction, from the smallest coffee purchase to multi-million dollar wire transfers, for every customer the institution serves.

At its essence, the ledger—often referred to as the Core Banking System (CBS)—serves as the crucial link between the physical reality of money and its virtual representation. While banks and payment institutions maintain "physical" accounts that pool client funds, it is the ledger that performs the vital task of tracking who owns what within that pool.

To understand this better, let's peek behind the curtain with a simple illustration:

Consider FinCorp, a fintech with two clients: Alice and Bob. Alice has EUR 100 in her account, while Bob maintains EUR 75. FinCorp itself holds these combined funds—EUR 175—in a single account at BankCorp. But here's the critical part: BankCorp's records only show FinCorp's total balance. Without a robust ledger, FinCorp would have no way to accurately track how much of that pooled money belongs to Alice versus Bob.

How a ledger enables precise fund tracking

At this point, you might wonder why FinCorp doesn't simply open separate BankCorp accounts for each of its clients.

While this may seem like a logical solution, it would introduce significant operational complexities that would make the business far less efficient. Consider a simple transaction between Alice and Bob. With a core banking system, this transfer is as swift as updating a database entry—virtually instant and costless. However, if each client had their own bank account, even the most basic transfer would require initiating a formal payment through systems like SEPA or SWIFT. Not only would this process take considerably longer—sometimes hours or even days—but it would also incur transaction fees each time, increasing operational costs.

Moreover, a ledger's flexibility extends beyond simple fund tracking as shown in the previous example. It is capable of handling more complex scenarios, especially due to the highly regulated nature of the sector; for example:

1. FinCorp receives EUR 200 into its pooled account via a virtual IBAN associated with Alice for incoming payments, which is identified as the one provided to Alice for receiving payments
2. The funds are not immediately credited to Alice because the amount and the counterparty triggered monitoring alerts (counterparty screening flag, amount limits reached or anything else checked at this point). Additional verification will therefore be requested from Alice before crediting
3. Until the verification is complete, the funds are allocated to an "Under Review" balance in the ledger, where all funds requiring additional validation by the middle-office team are held securely
4. Once Alice provides the required payment information and it is validated, this triggers in the ledger: (i) a EUR 200 debit from the "Under Review" balance, and (ii) a EUR 200 credit to Alice's account

This demonstrates how a ledger system enables precise fund tracking while enforcing compliance requirements, ensuring both security and operational efficiency throughout the payment lifecycle.

There are many other use cases for a ledger system, but explaining them all would be beyond the scope of this article. Keep in mind that it allows a financial institution to keep track of all the funds of all its clients in a convenient and compliant way.

When ledgering goes wrong

The consequences of getting this wrong can be catastrophic. The 2024 bankruptcy of Synapse article by Rajashree Chakravarty serves as a stark reminder of what can happen when financial institutions build their operations on unreliable core banking systems.

Fipto’s state-of-the-art hybrid ledger

At Fipto, we believe financial transactions should be instant, seamlessly integrated across both traditional and digital payment systems, and ensure the highest level of security. Our ledger is built with these core principles at its foundation.

Instant & Real-Time

Historically, banks operated on batch processing systems, where transactions aren't reflected immediately. For instance if you made a card payment in the morning, the money might still show in your account throughout the day, even though you had already committed to spending it.

A real-time ledger updates instantaneously when transactions occur. This is the type of ledger we built at Fipto to enable instant and real-time transactions. Here's how it works for a payout (outbound payment) with Fipto:

1. Your available wallet balance is instantly debited as soon as the payment is initiated.
2. The funds are credited to a transit wallet while transaction monitoring is performed
3. Upon successful validation, the funds are transferred—either directly on-chain for crypto payments or through fiat systems (SEPA, SWIFT, ACH...)—and the transaction is marked as “Completed”.

Digital & Fiat Worlds Working Together

Another key feature of our ledger is its ability to manage both digital and fiat currencies. Overall, it handles digital currencies almost identically to fiat, applying the same logic and rules to ensure full compliance. This enables us to deliver financial services that meet the high AML/CFT standards associated with fiat systems.

In contrast to the simple diagram of Alice and Bob's balances shown above, Fipto doesn't hold funds with a single banking partner, but with multiple payment partners across both digital and fiat systems. This is why tracking the "color" of money is so critical (as explained in this article by Clément Salaün): for every balance recorded in our ledger, we ensure its source and physical location are accurately identified.

When a sender initiates a payout to a recipient, our ledger determines the most suitable partner to process the transaction. Based on the above illustration, if Company ABC wants to make a EUR payout, our ledger identifies that the payment should be initiated from the account held with Partner B (whereas if Company XYZ had initiated the payment, we would use the funds held with Partner C).

Security First — Ledger Monitoring System

Payments and security naturally go together, with no compromise. To uphold this principle, we designed a sustainable and auditable ledger system powered by a Ledger Monitoring System ("LMS")-an internal module that enables real-time monitoring of our ledger's accuracy and detection of anomalies.

One of the most important features of the LMS is ensuring that our customers' total balances always match the pooled funds physically held with our banking partners.We have implemented alerts that trigger if the sum of customer balances for a given asset is above the amount we hold with the partner. In simple terms, if we owe our clients USDC 10,000  but only have USDC 9,987  with our digital asset partner, our LMS will raise an alert to investigate the discrepancy. This allows us to quickly detect technical or operational anomalies.

We haven't encountered any alerts of this kind since implementing the LMS. However, this monitoring capability remains vital for ensuring long-term audibility of our system.

Optimising for Liquidity provider (LP) settlement

Our platform goes beyond facilitating payments in different currencies. It also enables seamless exchanges between various types of money movements—whether it is converting fiat currencies (e.g. dollars or euros) into crypto, crypto to fiat, or trading one digital currency for another. We have built our ledger to be tailored to these exchanges.

Let me explain how it works with a real example. Imagine two users, Bob and Alice, making trades within the same hour:

First, Bob wants to buy USD 55,000 worth of USDC using EUR 50,000. When this happens:

• Bob receives USDC 55,000 from our company's internal ledger balance
• EUR 50,000 is taken from Bob's euro wallet and moved to our internal ledger balance

Then Alice comes along and wants to buy EUR 40,000 using 44,000 USDC. Here's what happens:

• Alice gets EUR 40,000 from our internal ledger balance
• USDC 44,000 is taken from Alice's wallet and moved to our internal ledger balance

The beauty of our ledger is that it automatically balances these trades. Since Bob bought USDC with euros and Alice did the opposite, we only need to process the net difference between their trades - which is EUR 10,000 and USDC 11,000. This approach makes the entire process far more efficient and cost-effective.

Fipto’s ledger system is more than just a technological solution—it’s a reflection of our commitment to transforming how businesses manage their payments. By connecting fiat and digital currencies, we are building a future where payments are not only fast and secure but also fully transparent and interoperable.

This is just the beginning. As we continue to innovate, we envision a world where instant settlements, digital currencies and programmable payments become the norm, empowering businesses to operate without borders or barriers.

At Fipto, we are not just creating solutions for today’s payment challenges—we are laying the foundation for tomorrow’s financial infrastructure.

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