The Federal Reserve has set the prices that banks will pay for its new instant payment system, FedNow, which is scheduled to
For next year, the 12 regional Federal Reserve banks will waive the monthly participation fee for banks. In 2024, banks will pay $25 per month per routing transit number to use the FedNow service.
Similarly, the reserve banks will waive the cost of up to 2,500 FedNow credit transfers per month next year and charge 4.5 cents per item after that. These prices, released Thursday, are in line with estimates released by the Fed in January.
The reserve banks will also introduce a 1 cent per item request for payment fee and a $1 per transfer liquidity management fee.
The fee schedule determines how much the Fed must charge to recover the costs of the services it provides, along with other costs that it would have had to cover if it were a private service provider. This additional sum, also known as a private sector adjustment factor, or PSAF, was established by the Monetary Control Act of 1980 to prevent the Fed from undercutting the private sector.
Overall, the Fed plans to increase its service fees by an average 2.9% next year to cover a PSAF of $23.7 million, which is $4.3 million more than what the Fed expects to collect for this year's adjustment. Of that total, $2.6 million is attributed to rising capital costs as the result of higher interest rates, $1.1 million is from higher sales tax rates and $600,000 is the result of additional Fed expenses.
The Fed expects to collect 100.2% of the capital needed to offset its costs and cover next year's PSAF. It projects the Fedwire Securities service to have the greatest recovery rate next year of 108%, with checks and the Fed Automated Clearing House recovering slightly more than 100%.
The Fedwire Funds Service and the National Settlement Service are expected to recoup just 97.7% of their costs, which the Fed attributes to ongoing technology investments in the services, higher operating costs and a concerted effort to maintain price stability in a rising price environment.
FedNow, which is
In a notice filed in the Federal Register, the Fed said that it followed market trends and its historic practices in determining prices for FedNow, including its initial offer of free and discounted services during the rollout. It noted that prices associated with the service are likely to change over time.
In a 2019 notice in the Federal Register, the Fed said that it typically takes 10 years for one of its services to achieve long-run cost recovery. It also stated that FedNow would likely not become cost-neutral in that time frame because it would have to price its services prohibitively high to meet that objective.
