Overview of Fedwire
Fedwire, formally known as the Federal Reserve Wire Network, is a real-time gross
settlement network owned and operated by the 12 U.S. Federal Reserve Banks. It is the
dominant high-value transfer mechanism in the US, handling trillions of dollars in
transactions daily. Fedwire has two variants: Funds (for USD transfers) and Securities (for
transfers of a limited group of securities).
How Fedwire works
Fedwire is a ~synchronous network. The Federal Reserve — and in particular, the Federal
Reserve Bank of New York — receives a wire and ~immediately debits the originating
financial institution’s account and credits the receiving financial institution’s account. Here’s
how it works:
Submission: A sender initiates a wire transfer with their institution. The institution debits
funds from their account, and sends a payment order to a Federal Reserve Bank. The order
includes the payment amount, the receiving institution's details, and any additional
instructions for reconciling the payment.
Verification: The Federal Reserve Bank verifies the payment order, ensuring the originating
institution has sufficient funds to cover the transaction.
Settlement: Upon verification, the funds are deducted from the originating institution and
credited to the receiving institution. This process occurs in real-time and on a transaction-by-
transaction basis, ensuring immediate finality and irrevocability of payments.
Confirmation: Both the originating and receiving institutions receive confirmation of the
completed transaction, typically within seconds or minutes.
Allocation: The receiving institution uses the provided instructions to reconcile the payment
with the correct recipient. Funds are deposited into their account.
Reversal: If the receiving institution cannot properly reconcile the payment, it is reversed. A
new wire transfer is created to send the funds back to the originating institution.
Reversals
Wire transfers are irrevocable. However, they can be reversed in a few instances. If a
receiving financial institution cannot allocate or otherwise decides to not accept a transfer, it
sends a reversal. Additionally, a sender can request that a wire is reversed. However, the
receiving financial institution has no obligation to honor the request. Learn more about wire
reversals and how they work with Increase.
Drawdown requests
Although Fedwire doesn’t support pulling funds, there’s a network-level primitive to request
payment. This is called a drawdown request. There’s also a drawdown request payment
network primitive which allows a transfer to be correlated with a drawdown request.
Support for drawdown requests is typically limited to corporate accounts and there’s usually
setup required by the account holder. Common use-cases are for intra-company money
movement or regular automated settlement. Settlement to Visa, for example, can be
coordinated by drawdown request. If you wish to use drawdown requests, contact
support@increase.com.
Non-financial messages
Fedwire supports a messaging network. It’s typically used for wire department to wire
department communication. Because wire processing can still be very manual, the messaging
network is often used to request additional information.
Timing
Fedwire operates according to a set schedule, opening at 9:00 PM ET on the preceding
calendar day and closing at 7:00 PM ET. In practice, Fedwire can extend the operating hours.
This typically happens in times of stress. Wires transfers are processed within the window
that they’re submitted.
These times are subject to change, and different financial institutions may have their own cut-
off times. Depending upon the bank you work with at Increase, wires may only be submitted
within restricted hours. Also, keep in mind that holiday schedules could affect these times.
Technical implementation
Fedwire uses a proprietary message format that’s comprised of tags. For example, the tag
{2000} corresponds with the amount of the transfer. Below is an example of a typical wire
transfer to a third party.
Tag Description
{1500}
Sender Supplied Information - This contains a number of required technical
attributes to help when processing the transfer such as the format version.
{1510}
Type and Subtype Code - This is used to determine the type and purpose of the
transfer. 1000 refers to a basic value transaction between two bank customers.
{1520}
Input message accountability data (IMAD) - The IMAD is an identifier. It's
composed of the date (YYYYMMDD), the endpoint ID, and the sequence number.
{2000} Amount - The amount, up to $10 billion less one penny.
{3100} Sender's Routing Number - This is originating bank’s routing number.
{3400} Receiver's Routing Number - This is the routing number of the receiving bank.
{3600}
Business Function Code - This specifies the business purpose of the transfer. For
example, CTR refers to a customer transfer where the beneficiary is not a bank.
{4200}
Beneficiary information - This is information about the recipient including their
account number, name, and address.
Originator identification - This is an identification code or message used to
{5000} describe the sender. This can take the shape of a SWIFT Bank Identifier Code (BIC),
Fed Routing Number, Passport Number, Tax Identification Number, and others.
{6000} Originator to Beneficiary Information - This is a message to the recipient.
In 2024, Fedwire intends to move to ISO 20022. Fedwire uses an IBM queuing product, MQ.
Operating a wire integration
One notable detail about wire operations is how manual they are at many in stitutions. Many
financial institutions assume that wires will have manual intervention and therefore aren’t as
strict as they might be with details like account numbers.
Fedwire can be used for settling USD legs of non-US transfers. Fedwire therefore supports
passing through a SWIFT Business Identifier Code (BIC).
