What is Fedwire?

Fedwire is the Federal Reserve's electronic payment system for sending large, time-sensitive payments between banks instantly. Run by the 12 Federal Reserve Banks, Fedwire settles each payment individually in real time with immediate finality.

Payments sent through Fedwire cannot be reversed once completed. The system handles trillions of dollars daily in high-value transfers between financial institutions, government agencies, and businesses with Federal Reserve accounts.

Fedwire operates Monday through Friday from 9:00 p.m. the previous day until 7:00 p.m. Eastern Time, closing on weekends and federal holidays.

7 key functions of Fedwire

Banks and other financial institutions use Fedwire for payments that require immediate, irrevocable settlement.

1. Large commercial payments: Businesses use Fedwire for major purchases, property closings, or other high-value commercial transactions where immediate settlement is important.
2. Financial market transactions: Securities dealers, brokers, and investment firms use Fedwire to settle trades in government securities, mortgage-backed securities, and other financial instruments.
3. Federal funds trading: Banks borrow and lend reserve balances to each other overnight using Fedwire to move the funds.
4. Foreign exchange settlement: Banks use Fedwire as part of foreign currency trades to settle the US dollar side of transactions.
5. Treasury payments: The US Treasury uses Fedwire for certain government payments including some tax refunds and vendor payments.
6. Correspondent banking: Banks that provide services to other banks use Fedwire to move funds on behalf of their correspondent bank customers.
7. Emergency funding: When banks need to quickly move money to meet reserve requirements or cover unexpected shortfalls, they use Fedwire for speed and certainty.

The common thread across these uses is the need for same-day settlement with immediate finality. Participants pay higher fees for Fedwire compared to ACH because they need the guarantee that payment completes irreversibly on the same business day.

How Fedwire works

Fedwire settles payments by moving money between bank reserve accounts held at Federal Reserve Banks. When a bank sends a Fedwire payment:

1. The sending bank submits payment instructions to its Federal Reserve Bank. These instructions include the receiving bank's routing number, the recipient's account details, and the payment amount.
2. The Federal Reserve immediately debits the full amount from the sending bank's reserve account.
3. The Federal Reserve credits the same amount to the receiving bank's reserve account.
4. The receiving bank gets notified that funds arrived and credits the final recipient's account.

Each payment processes individually in full as soon as submitted. Payments do not batch together or wait for scheduled settlement times. Settlement happens in real time, completing within seconds to minutes.

Once settled, Fedwire payments become final. They cannot be cancelled, reversed, or returned for insufficient funds. The receiving institution has immediate, guaranteed access to the money.

Real-time gross settlement explained

Fedwire uses real-time gross settlement (RTGS), which means it processes each payment immediately and in full.

• Real-time means the system handles payments as they arrive without waiting to batch them together. There is no delay between when a bank submits a payment and when settlement occurs.
• Gross settlement means each payment settles individually for its full amount. The system does not net payments between banks. If Bank A sends $1 million to Bank B, and Bank B sends $1 million back to Bank A, Fedwire processes both as separate $1 million transfers rather than canceling them out.

This contrasts with the ACH network, which batches payments and settles them at scheduled intervals throughout the day. ACH also nets payments between institutions, settling only the difference between what each bank owes and is owed.

RTGS provides immediate finality. Once a Fedwire payment completes, it cannot be cancelled or reversed. The receiving bank has guaranteed access to the funds immediately. This finality makes Fedwire suitable for high-value payments where both parties need certainty that settlement has occurred.

Fedwire fees and costs

Fedwire charges fees on a per-transaction basis with volume discounts available. The base fee for each Fedwire transfer is $0.97 according to the 2025 Federal Reserve fee schedule. Financial institutions pay this fee for both sending and receiving transfers.

Volume discounts reduce costs for institutions processing many transactions. Banks that exceed certain monthly volume thresholds get per-transaction discounts. Additional incentive discounts apply when current volume exceeds historical benchmarks.

High-volume institutions may pay as little as $0.156 per transfer after discounts. Low-volume institutions pay closer to the full $0.97 per transfer.

Additional surcharges apply in certain situations:

• Transfers processed after 5:00 p.m. Eastern Time incur an after-hours surcharge
• Offline transfers submitted by telephone carry higher fees than electronic submissions
• Settlement arrangements using Fedwire for interbank obligations pay additional fees

These fees cover the Federal Reserve's operational costs for maintaining the infrastructure. The Monetary Control Act of 1980 required the Federal Reserve to charge for payment services rather than providing them free to member banks.

For comparison, ACH transfers typically cost a few cents per transaction, making them much cheaper for routine payments. Fedwire's higher fees reflect the value of immediate, irrevocable settlement.

Fedwire vs other payment systems

Fedwire differs from other payment rails in settlement speed, finality, and intended use cases.

• Fedwire vs ACH: ACH batches payments and settles them at scheduled intervals, typically taking 1-2 business days. Fedwire settles instantly. ACH costs a few cents per transaction while Fedwire costs around $1. ACH works well for routine, lower-value payments. Fedwire suits large, time-critical transfers.
• Fedwire vs FedNow: FedNow is the Federal Reserve's instant payment service launched in 2023. Both settle in real time, but FedNow operates 24/7/365 while Fedwire closes nights, weekends, and holidays. FedNow has a $500,000 transaction limit and targets retail and small business payments. Fedwire has no limit and serves wholesale, institutional payments.
• Fedwire vs SWIFT: SWIFT is a messaging network for international payments, not a settlement system. SWIFT messages instruct banks to move money, but actual settlement happens through correspondent banking relationships or systems like Fedwire. International wire transfers often use SWIFT messaging combined with Fedwire settlement for the US dollar portion.
• Fedwire vs RTP: RTP is The Clearing House's instant payment system. Both provide real-time settlement, but RTP operates 24/7/365 like FedNow. RTP has smaller per-transaction limits and serves primarily retail and business payments rather than wholesale transactions.

The choice between these systems depends on payment size, timing requirements, and whether participants need settlement outside standard banking hours.