If business and commerce are always on in the digital age — existing as 24/7, year-round endeavors — so must the settlement systems that enable a broad range of transactions.
In a Sept. 11 letter to central bank chairman Jerome Powell, a group of senators including Sen. Sherrod Brown, D-Ohio, chairman of the Senate Committee on Banking, Housing and Urban Affairs; Sen. Chris Van Hollen, D-Md.; Sen. Elizabeth Warren, D-Mass.; Sen. Tina Smith, D-Minn.; and Sen. John Fetterman, D-Pa.; said that the Fed should finalize a proposed rule that would expand the Federal Reserve’s settlement services’ operating hours to weekends and holidays – and eventually move toward a 24-hours-a-day, seven-days-a-week, 365-days-a-year continuum.
The expansion of the Fedwire Funds Service and the National Settlement Service (NSS) would allow users of those settlement services to access their money at any moment, the senators said.
That expansion would move beyond the current proposal from the Fed, where Fedwire and NSS do not operate on weekends and holidays — but now would operate every day of the year.
The proposal maintains Fedwire’s existing operating hours of 9 p.m. to 7 p.m. ET, and NSS’s operations, which run from 9 p.m. to 6:30 p.m. ET.
“While this proposal represents a positive step, more must be done,” Brown noted in the letter. Typically, ACH transactions can take several days to clear and wind up in consumers’ and small business’ bank accounts.
“Expanding the operating hours of settlement services would lower costs for individuals that are vulnerable to overdraft and non-sufficient funds fees, and help small businesses maintain cash on hand to pay their workers, settle debts, and have a financial buffer in case of an emergency,” per the missive, as consumers pay mortgages, rent and credit card obligations.
To perhaps bolster the urgency, the senators cited PYMNTS research, noting our findings that two-thirds of Americans report living paycheck to paycheck — and the expanded settlement options would help them sidestep overdraft and non-sufficient funds fees, which cost them billions of dollars. Smaller businesses would also benefit from the improved cash flow visibility.
“It is critical that the implementation of expanded Fedwire services increases speed and efficiency while also protecting wire transfer customers from fraud. Accordingly, I encourage the Board to regularly assess potential operational risks posed by expanded settlement services and continue developing a risk-management framework that sets clear risk-management expectations for participating financial institutions,” Brown wrote.
As PYMNTS reported in August, the Fed’s annual report detailed that the 12 reserve banks’ operating expenses and imputed costs tied to Fedwire and the National Settlement Service (which also offers same-day finality for private sector transactions) totaled $154.5 million in 2023, per the annual report. Revenue from operations totaled $161.5 million, resulting in a net income of $9.1 million. The last number reverses a net loss seen in 2022 of $3.5 million amid ongoing tech investments.
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