Fedwire Funds Service (Wholesale Service)
The Fedwire Funds Service provides a real-time gross settlement system
in which more than 9,500 participants are able to initiate electronic funds
transfers that are immediate, final, and irrevocable. Depository institutions
that maintain an account with a Reserve Bank are eligible to use the service to
send payments directly to, or receive payments from, other participants.
Depository institutions can also use a correspondent relationship with a Fedwire
participant to make or receive transfers indirectly through the system.
Participants generally use Fedwire to handle large value, time critical
payments, such as payments to settle interbank purchases and sales of federal
funds; to purchase, sell, or finance securities transactions; to disburse or
repay large loans; and to settle real estate transactions. The Department of the
Treasury, other federal agencies, and government sponsored enterprises also use
the Fedwire Funds Service to disburse and collect funds. In 2003, the Reserve
Banks processed 123 million Fedwire payments having a total value of $436.7
trillion.
Fedwire funds transfers are processed individually, while ACH transfers
are transferred in batches. The Federal Reserve uses secure, sophisticated
data communications and data processing systems to ensure that each transfer is
authorized by the sender and that it is not altered while it is under the
control of a Reserve Bank. Although a few depository institutions use the
telephone to initiate Fedwire payments, more than 99 percent of all Fedwire
funds transfers are initiated electronically. The Federal Reserve processes
Fedwire funds transfers in seconds, electronically debiting the account of the
sending institution and crediting the account of the receiving institution. The
Federal Reserve guarantees the payment, assuming any risk that the institution
sending the payment has insufficient funds in its Federal Reserve account to
complete the transfer.