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The timing and funding of Fedwire funds transfers

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Listed:
  • James J. McAndrews
  • Samira Rajan

Abstract

An examination of the Federal Reserve?s Fedwire Funds Transfer service reveals that the highest concentration of funds-transfer value occurs in the late afternoon. The authors attribute this activity peak to attempts by banks (and their customers) to coordinate payment timing more closely. By synchronizing payments, banks can take advantage of incoming funds to make outgoing payments?especially during periods of heavy payment traffic. Conversely, during off-peak times, banks must rely more on account balances or overdrafts to fund payments, which increases the cost of making payments. For this reason, banks time their payments to coincide with an activity peak, thereby reinforcing the peak.

Suggested Citation

  • James J. McAndrews & Samira Rajan, 2000. "The timing and funding of Fedwire funds transfers," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 17-32.
    • Handle: RePEc:fip:fednep:y:2000:i:jul:p:17-32:n:v.6no.2
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    References listed on IDEAS

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    6. Kobayakawa, Shuji, 1997. "The Comparative Analysis of Settlement Systems," CEPR Discussion Papers 1667, C.E.P.R. Discussion Papers.
    7. Heidi Willmann Richards, 1995. "Daylight overdraft fees and the Federal Reserve's payment system risk policy," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 1065-1077.
    8. David L. Roscoe, 1998. "Continuous linked settlement," Proceedings 576, Federal Reserve Bank of Chicago.
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    Keywords

    Fedwire; Payment systems;

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