The Ops Stop provides your organization with a one-stop shop full of helpful operational resources offered by the Federal Reserve Banks. This month’s article focuses on the Fedwire® Discount Tool, which can help you and your financial institution calculate incentive discounts associated with your Fedwire Funds Service transactions.

Did you know that the Federal Reserve Banks offer incentive discounts on Fedwire Funds Service transactions based on your institution’s current volume compared to its historical volume benchmark? More importantly, are you aware that you can use the Fedwire Discount Calculator Tool to determine the impact this discount will have on your monthly bill?

Qualifying for the incentive discount

Your institution can receive an 80 percent incentive discount on volume that exceeds 60 percent of your historic benchmark volume. Historic benchmark volume is based on your institution’s average daily activity over the previous five calendar years. If your institution has fewer than five full calendar years of previous activity, your historic benchmark volume is based on your daily activity for as many full calendar years of data as are available. If your institution has less than one year of past activity, it qualifies automatically for incentive discounts for the year. The applicable current incentive discounts are as follows:

  • Tier 1 Incentive: $0.656 discount for transfers up to 14,000
  • Tier 2 Incentive: $0.196 discount for transfers 14,001 to 90,000
  • Tier 3 Incentive: $0.128 discount for transfers over 90,000

Using the tool

You can prepare to use the tool by collecting the following information in advance from your Master Account and Subaccount monthly billing statement(s):

  • Gross origination volume for all ABAs in your Master Account Family (product code 10021)
  • Gross receipt volume for all ABAs in your Master Account Family (product code 10022)
  • Historical benchmark volume (product code 10025)

Now you are ready to visit the Fedwire Discount Calculator Tool (XLS) and save a copy to your desktop. In Section 1, you can enter your data in the yellow fields as shown below.

Section 1: Please input the requested data from your bill

Once you have entered your data, the “Total Monthly Gross Volume” in Section 1 and the “Incentive discount schedule for your institution for the selected calendar month” in Section 2 will automatically calculate as shown in the image below.

Section 1: The Total Monthly Gross Volume appears

As shown in Section 1 above, the example institution has a historical benchmark volume of 80,000, meaning that the institution will receive incentive discounts for volume above 48,000 transfers (as shown in Section 2 above). As shown below, Section 3 provides details for each tier, including the pre-incentive fee and the fee for the transfers that qualify for an incentive discount.

The example institution’s current volume is 200,000 transfers. This institution did not earn a Tier 1 discount because that tier applies to transfers 1 to 14,000, and the volume in Section 2 (48,000) is above 14,000. Tier 2 applies to transfers 14,001 to 90,000, so the example institution will pay the pre-incentive fee for transfers 14,001 to 48,000 and will receive the Tier 2 incentive discount for transfers 48,001 to 90,000. Tier 3 applies to transfers over 90,000, so because the volume in Section 2 (48,000) is below 90,000, the institution will receive the Tier 3 incentive discount for all transfer volume over 90,000.

Section 3: The effective per-transfer price that your institution pays this month

Finding the incentive discount on your account billing statement

Your Master Account-level detailed billing statements will include Fedwire Funds gross origination and gross receipt volume reflecting only your Master Account (i.e., gross origination and receipt volume of related Subaccounts will not be included). However, Master Account detailed billing statements will display pre-incentive fees and incentive discounts earned by the Master Account and any related Subaccounts, as shown below.

Section 4: How transfer fees will appear on your statement for this month

Detailed billing statements for individual Subaccounts will show only gross origination and gross receipt volume and will not reflect any discounts. Pre-incentive fees and incentive discounts earned via Subaccount activity will be displayed only on the Master Account billing statement.

Visit the Fedwire Funds Service 2018 Fee Schedules page for additional details on the Fedwire Discount Calculator Tool and Fedwire fees.