Fedwire

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DEFINITION of 'Fedwire'

A real-time gross settlement system (RTGS) of central bank money used in the United States by its Federal Reserve Banks to settle final payments in U.S. dollars electronically between its member institutions.

Owned and operated by the 12 Federal Reserve Banks, the Fedwire is a networked system for payment processing between the member banks themselves, or other Fedwire member participants. Members can consist of depository financial institutions in the United States, as well as U.S. branches of certain foreign banks or government groups, provided that they maintain an account with a Federal Reserve Bank.

BREAKING DOWN 'Fedwire'

While the Fedwire is not managed for a profit, law does mandate the Fedwire charge fees for use of the service in order to recoup costs. Both participants in a given transaction will pay a small fee.

The Fedwire system processes trillions of dollars daily, and it includes an overdraft system covers participants with existing and approved accounts. It has been in operation in some format for nearly 100 years, and as such, the Fedwire system is designed to be highly reliable. It often processes high dollar values, and critical recurring payments domestically and abroad.

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