Prices for Federal Reserve payment services to depository financial institutions will go up by an average of 2.4% on Jan. 2 under a new fee schedule approved last week by the Federal Reserve Board of Governors.
The Fed estimates Check Services customers will see average price increases of 3.3%. Users of the Fedwire Funds Service will pay 3.7% more, while FedLine Solutions customers can expect to pay an average of 2.9% more. Fees will remain unchanged for the FedACH [automated clearing house] Service, National Settlement Service, and Fedwire Securities Service.
The 12 Federal Reserve banks project they will recover 100.2% of their costs in providing the services next year following 2019’s estimated 100.8% cost recovery. Under the federal Monetary Control Act, the Reserve Banks are required over the long run to recover their direct, indirect, and imputed and other costs (taxes, certain Board of Governors expenses, float, and some other expenses) as well as earn a return on equity, or profit, as if a private-sector firm had provided the services.
For 2020, the Fed has budgeted $443.1 in revenue from the payment services on a pro-forma basis and $436.3 million in expenses for net income of $6.7 million. This year’s estimated revenues are $442.4 million and $433.4 million in expenses for estimated net income of $9 million.
A 66-page notice the Fed published in the government’s Federal Register gives specific pricing and related details about each of the payment services. The notice says the FedACH Service will not achieve full cost recovery this year “because of investment costs associated with the multiyear technology initiative to modernize its processing platform. This investment is expected to enhance efficiency, the overall quality of operations, and the Reserve Banks’ ability to offer additional services to depository institutions.”
The ACH network has added same-day settlement services over the past several years in response to demand from banks and businesses for faster payments. The Fed is one of the nation’s two ACH network operators, the other being the bank-owned The Clearing House Payments Co.
The notice also says the Fed will publish cost-recovery data for its planned FedNow real-time gross-settlement service once FedNow goes live in 2023 or 2024.