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Fedwire

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Fedwire Funds Services, commonly known as Fedwire, is a real-time gross settlement transfer system that allows participating financial institutions to send and receive same-day fund transfers.

Along with its private sector counterpart, CHIPS, Fedwire forms the primary network for transferring and settling payments in US dollars. Fedwire processes trillions of dollars per day, settling transactions individually and immediately; once settled, the transaction is permanent and irrevocable. In processing payments individually, it differs from CHIPS, which is a netting engine that aggregates payments. 

Fedwire Funds Services is owned and operated by the twelve Federal Reserve Banks, along with 2 other payment systems, Fedwire Securities Service and the National Settlement Service. Eligible participants for Fedwire Funds Services include depository banks and other financial institutions that have an account with a Federal Reserve Bank. During a wire transfer, both sending and receiving participating institutions pay a fee to help the Fed recoup costs.

Fedwire is governed by the Uniform Commercial Code, to ensure domestic wire transfers settle within one business day. Regulation J requires banks to process a wire transfer on the same business day it was received by the Federal Reserve; Regulation CC determines that wire transfers are received upon delivery of account and credit information. 

When and How Fedwire Operates

Fedwire operates weekdays, from 9 p.m. the prior calendar day, to 7 p.m. Eastern Time. The system is closed during weekends and federal holidays, with the exception being that service for Mondays are operational from 9 p.m. on the preceding Sunday. Though operational until 7 p.m. ET, the deadline for initiating a payment on behalf of a third party, such as a bank’s customer, is 6 p.m. ET. 

Fedwire is a real-time gross settlement transfer system, which means that it processes each transaction individually and in full. Here’s how it works:

A payment is initiated when the sender provides payment instructions to their bank. The bank debits the account and sends an instruction to its Federal Reserve Bank to transfer funds to the recipient. If the sender and receiver both have accounts with that particular Federal Reserve Bank, that Federal Reserve Bank can debit the sender’s account and credit the receiver’s account, and notify the recipient’s bank of the credit. When the recipient’s bank gets the notification, it can credit the recipient’s bank. Once the payment settles, it is irrevocable. 

History of Fedwire

The Federal Reserve Banks started using wire transfers in 1918, using the telegraph. In the 1980s, to better support banking computer operations, the Fed updated its internal systems so that the maximum downtime would be just a few hours. Today, three processing centers support Fedwire—the primary processing environment and two “backups” located far apart to mitigate disrupting effects such as weather, power outages, and other interruptions. 

Modern Treasury provides fast and flexible APIs for Wire Transfers and other payment types

Modern Treasury is a payment operations platform built for the entire cycle of money movement. Our APIs and software applications directly integrate with your bank accounts, allowing you to process payments using ACH, RTP, Wires, and multiple other payment methods 2x faster than your existing solution. Modern Treasury automates payment reconciliation and accounting, giving you back time and control over your payment operations.

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Chris Frakes
Written by:
Chris Frakes
Last updated:
Sep 27, 2021
Last updated:
Sep 27, 2021

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Payment Industry Bodies

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TCH

The Clearing House (TCH) is a banking association and payments company owned by 20 of the world’s largest commercial banks.

CHIPS

The Clearing House Interbank Payments System, or CHIPS is the largest private sector USD clearing system for wire transfers.

NACHA

The National Automated Clearing House Association (NACHA) is responsible for overseeing the Automated Clearing House (ACH) Network, which is used to send money electronically between banks throughout the United States.

Journal
What Happens When the Fed Goes Down?

The Federal Reserve (“The Fed”) promotes the stability of the financial system, including playing an important role in maintaining the integrity of the US payments system. What happens when the FedACH, FedWire, and National Settlement Service are offline?

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