The The US Federal Reservethe latest report to congress provided a snapshot of spending and returns on investment for all types of payment systems.

As real-time fund flows gain ground, the Fed’s letter for 2023 details progress and positive returns on Fedwirewhich had previously been in the red, and gave a cumulative cost breakdown of the still emerging FedNow® servicewith an estimate of when this system will actually be in the black.

The 222-page “Annual Report of the Board of Governors of the Federal Reserve SystemThe report, released last week, looks at the efforts of the 12 Reserve Banks to provide financial services, facilitate payments, and support the efforts of the individual deposit-taking institutions that shape the United States banking landscape.

The Fed itself described the reserve banks as “Surgical arm“of the central banking system. The reserve banks collectively generate revenues from various services and offerings, which can serve as an indicator of the demand that the banks themselves (as reserve bank customers, so to speak) see from their end markets and customers for faster payments.

Fedwire in positive territory

Fedwire acts as a real-time network for time-sensitive, high-value large transactions for banks, corporations and government agencies.

It is likely that Fedwire will be increasingly used, given the ongoing rollout and mandates surrounding ISO20022the data-rich messaging standard that is gaining acceptance worldwide.

“We will see how banks and FinTechs determine how they to use (extended) data to optimize reconciliation and error handling for their customers,” Laura SullivanSenior Product Manager at Form3PYMNTS said in November.

The operating costs and imputed costs of the reserve banks in connection with Fedwire and the National Settlement Service (which also offers same-day finality for private sector transactions) was $154.5 million in 2023, according to the annual report. Revenue from operations was $161.5 million, resulting in a net profit of $9.1 million. The last figure returns a Net loss In 2022, $3.5 million is expected from ongoing technology investments.

From 2022 to 2023, the number of Fedwire money transfers originating from depository institutions fell 1.4% to about 193 million, the report said. However, the average daily value of Fedwire money transfers in 2023 was $4.3 trillion, an increase of 2.5% Year after yearsuggesting a demand for the security and transparency that Fedwire provides for large dollar flows.

As an indication of where we might see increased demand for electronic transfers, Galileo Financial Technologies Product Manager David Fire told PYMNTS this month that on the same day, faster Bank transfers are designed to help transform a wide range of enterprise and consumer use cases through real-time notifications. Galileo announced last month that it offers the possibility of electronic transfer to FinTechs. Through its API for transfers, Galileo connects FinTechs with Joint Federal Savings Bank to Fedwire.

“The assurance of a secure same-day transfer is critical to avoid that window of risk where, for example, a supplier has shipped a product but the payment for that product is at risk or can be recalled,” Feuer said. “We see a variety of use cases in both retail and commercial banking, and of course both deposits and loans, where transfer is proving to be a really important enabler for use cases in those segments.”

ACH remains a profit center. The Fed said in its report that reserve banks spent $167.3 million in operating expenses on commercial ACH transactions. Operating revenues were $183.3 million, resulting in a net profit of $17.1 million. Reserve banks processed 18.9 billion commercial ACH transactions in 2023, an increase of nearly 1.8% from 2022. The average daily value of FedACH Remittances amounted to approximately $157.9 billion in 2023, an annual increase of 2%.

FedNow is still in progress

The report also stated that FedNow volumes were “modest,” although “instant payments will be a normal part of everyday commerce over the long term.”

There is a price tag. The The Federal Reserve invested $545 million To implement the FedNow servicethe report.

“The figure reflects all of the costs of implementation, including a new cloud-based design to support secure and reliable 24/7 processing, integration with existing Federal Reserve account management systems to provide ease of use for participants, and industry education and outreach to prepare stakeholders who choose to adopt instant payments,” the report said. “Over time, the Federal Reserve will release transaction volume information on a regular basis.”

So it will take some time for the new instant payments infrastructure to bear fruit – perhaps more than a decade. In the meantime, the central bank said in the report that it “expects the FedNow service to achieve long-term cost recovery for the first time, beyond the 10-year period typically applied to mature services.”