Zac Kester breaks down why settlement speed is becoming a competitive edge in private credit

Every trader learns early that a trade isn't finished when it's executed. Until cash and assets change hands, the position carries counterparty risk, ties up collateral, and depends on a chain of confirmations working as intended. Zac Kester, who spends his days balancing lending, investment, and liquidity at Advanta Management, sees that same lesson playing out in private credit. In this market, the wait between a credit decision and settled cash has historically been measured in days rather than seconds.

Public markets have spent three decades shortening that wait. Payments infrastructure is catching up. Straight-through processing, real-time payment rails, and shorter settlement cycles are speeding transactions and reducing reliance on manual work. Private credit, long one of finance's more manual corners, is starting to feel pressure to keep up.

From Execution to Settlement in a T+1 World

The settlement cycle for U.S. securities shows how far the industry has come. Equities moved to T+3 in 1995 and to T+2 in 2017. On May 28, 2024, the standard became T+1, meaning trades settle one business day after execution.

The shorter cycle changed how firms handle trades. Trades now need to be allocated, confirmed, and affirmed on trade date, with custodians affirming by 9 p.m. Eastern so that settlement instructions can reach the Depository Trust Company in time. Firms have far less room to fix a mismatched instruction or a missing data field before it turns into a failed trade.

The payoff was measurable. In the first months after the switch, the industry's T+1 after-action report found that the NSCC clearing fund fell by about $3 billion, or 23 percent, compared with the prior three-month average. A shorter window between trade and settlement means the clearinghouse has less exposure to cover, and members must set aside less capital against that exposure. For traders, that means less money tied up waiting for trades to settle.

Straight-Through Processing Is the Engine

None of that would work without straight-through processing, or STP. The term describes a transaction that moves from initiation to final settlement without anyone rekeying data. Once the details are captured, connected systems automatically validate, route, settle, and reconcile the transaction.

STP emerged as a goal in securities markets in the late 1990s and early 2000s, when trades still passed between departments and were confirmed by phone, fax, or email. Each manual handoff added delay and increased the chance of error. Industry estimates put manual processing error rates at around 3 to 5 percent, and many banks still find that only about 60 percent of their transactions run straight through without human intervention.

Today, STP reaches well beyond trading. Accounts receivable teams use it to capture and match incoming payments automatically, merchants use it to reconcile card sales against their accounts, and banks use it to approve and post transfers with built-in fraud and compliance checks. The principle is the same everywhere: capture data once, validate it early, and pass it through without reentering it.

Instant Payments Versus Faster Clearing

Payments have followed a similar path. The Clearing House launched the RTP network in 2017, and the Federal Reserve introduced the FedNow Service in July 2023. Both operate 24 hours a day, every day of the year, and settle each payment individually within seconds rather than bundling transactions into batches the way ACH does.

Adoption has moved quickly. FedNow grew from about 1,000 participating institutions at launch to more than 1,600 by early 2026, and its per-transaction limit rose to $10 million in late 2025, matching RTP. Other markets are moving in the same direction, with Canada's Real-Time Rail designed to clear and settle individual payments around the clock once it goes live.

A payment can appear instant to the recipient without actually settling instantly. Some services credit a recipient quickly while the actual movement of funds between banks settles hours later. A true instant payment clears and settles in one step, with finality. That gives the recipient certainty, but it also leaves the sender little room for error: real-time payments generally can't be reversed if the money goes to the wrong place. Checks need to happen before the payment goes out.

Why Private Credit Has Been Slow to Catch Up

Private credit is bespoke by design. Loans are commonly negotiated one at a time, collateral packages differ from deal to deal, and documentation rarely fits a template. That flexibility is much of the asset class's appeal, but it has also kept its operations surprisingly manual.

Capital calls still go out as PDF notices. Wire instructions still travel by email. Teams often reconcile draw requests, interest payments, and collateral reports in spreadsheets. Each step adds hours or days, and each is a point where an error or a fraudulent instruction can slip in.

Much of the cost shows up as idle cash rather than as an expense line. Capital called from investors but not yet deployed earns next to nothing. When a repayment arrives late on a Friday and sits until Monday for reconciliation, the cash can sit idle for several days. Across a portfolio and a full year, those days add up.

How Zac Kester Approaches Speed and Risk

For a fund manager, faster payment rails matter most when information can move from underwriting to servicing to reporting without being retyped at each stage.

Kester's role spans lending, investment, and treasury. He brings sales, credit, and compliance teams together early so they can screen out weak deals before they consume resources. His work also includes real-time collateral monitoring and stress testing, so the fund can see whether the assets backing its loans would hold up if markets shifted or a borrower defaulted. Both practices depend on current data. By the time a team checks a covenant against last month's collateral value, it may already be too late to act.

He also has to make sure cash is available when the fund needs it. Because the fund holds its notes long term, Kester manages cash flow carefully to support operations and meet investor obligations through market swings. Shorter settlement windows reduce cash stuck in transit, making that balancing act easier. Funds with clean data, clear approval chains, and strong pre-release controls are better placed to benefit from faster payments. For funds without them, speed can expose operational weaknesses.

Velocity of Money and Access to Capital

These delays also affect how money moves through the wider economy. Economists describe the link between money and economic activity with the equation of exchange, MV = PY, where M is the money supply, V is velocity, and PY is nominal output. Velocity measures how many times a dollar changes hands in a given period.

Settlement delays can temporarily make money unavailable. A payment that takes two or three days to clear means neither party can access the funds during that time. When settlement shrinks to seconds, the same stock of money can support more transactions because less of it is waiting to clear.

In credit markets, faster settlement can help lenders put repayments back to work sooner, a process central to Zac Kester's work. A lender that receives repayments instantly and redeploys them quickly can fund more loans from the same capital base over a year. A small business that gets paid in seconds needs less short-term borrowing to cover payroll while invoices clear. In that sense, faster settlement widens access to capital without adding a single new dollar to the system.

Payment technology alone doesn't determine how quickly money circulates. Measured velocity depends on other factors, including interest rates, saving habits, and how much cash people choose to hold. Faster money also means faster losses when something goes wrong. Real-time processing can improve access to capital, but it doesn't remove every obstacle.

What to Watch Next

The issues Zac Kester returns to give traders and credit managers a few practical things to watch:

• Settlement versus crediting. Confirm whether a provider's "instant" payment is truly settled or only credited, and plan liquidity around the answer.
• Data standards. FedNow messages use the ISO 20022 standard, whose richer structured data supports automated reconciliation and straight-through processing.
• Pre-release controls. Beneficiary verification, dual approval, and real-time fraud screening matter more when payments can't be pulled back.
• Shrinking idle balances. Funds and desks that cut the time cash spends in transit will need smaller operating buffers.

About Zac Kester

Zachary Kester is Managing Director of Advanta Management and manager of the Advanta Charitable Lending Fund LLC, a private credit facility organized as a program-related investment that focuses on lending with a charitable mandate. He supervises the fund's lending and investment teams and oversees its strategy, liquidity, investor reporting, and audit preparation. He holds the Chartered Advisor in Philanthropy (CAP) designation from The American College of Financial Services and a Certificate in Fundraising Management and Philanthropic Studies from the Indiana University Lilly Family School of Philanthropy.