Payments5 min readUpdated October 15, 2026

What Is CHIPS (Clearing House Interbank Payments System)?

CHIPS is the private US dollar wire system run by The Clearing House. How it settles, CHIPS vs Fedwire, hours, and CHIPS vs Fed reference numbers.

Nick Bonnassies, CMO at Tagada · checked against 11 sources

Article summary

TL;DR

CHIPS is the Clearing House Interbank Payments System, a private US network that clears and settles large-value dollar wires between banks. It has nothing to do with card chips. The Clearing House operates it for 43 direct participant banks. It offsets payments against prefunded balances and settles each one with finality when it is released, usually within seconds.

CHIPS is a bank-to-bank wire system for US dollars, run by The Clearing House. It is not the EMV chip on a payment card.
It settled about $2 trillion a day on average in 2025. About 95% of its payments begin or end outside the US.
CHIPS offsets queued payments against each other and against prefunded balances held at the Federal Reserve Bank of New York. A released payment is final and irrevocable.
Fedwire Funds, run by the Federal Reserve, settles each payment gross in central bank money. CHIPS needs far less liquidity to move the same value.
A Fedwire transfer is traced with its IMAD and OMAD. A CHIPS payment message is identified by its payment sequence number.

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On this page

CHIPS here means the Clearing House Interbank Payments System, a US wire network for banks, not the EMV chip on a payment card. If a wire confirmation or a bank statement mentions CHIPS, this is the system it refers to.

What is CHIPS?

CHIPS is "a private-sector high-value U.S. dollar clearing and settlement system" operated by The Clearing House.1 Banks use it mainly for the dollar leg of cross-border transfers. Based on fourth-quarter 2023 data, about 95% of CHIPS payments begin or end outside the US.2

$2.0T

Average value settled per business day in 2025

632,419

Average payments per day in 2025

Direct participant banks in 2026

Figures from The Clearing House's annual statistics.4 For January to September 2026, the daily average rose to about $2.27 trillion and 663,655 payments.4 Participants are US commercial banks or foreign banks with a US branch or agency.2

On July 18, 2012, the Financial Stability Oversight Council designated The Clearing House Payments Company, the operator of CHIPS, a systemically important financial market utility.2 The Federal Reserve Board is its supervisory agency.7

1970CHIPS starts as a next-day settlement system in New York
Oct 1, 1981Moves to same-day settlement
2000Continuous intraday settlement replaces end-of-day netting
Jul 18, 2012Designated systemically important by FSOC
Apr 8, 2024First US high-value system on ISO 20022

Dates from the CHIPS public disclosure2 and The Clearing House's migration notice.5

How a CHIPS payment works

CHIPS calls itself a hybrid. It nets payment obligations continuously, not once a day, and settles each payment the moment it is released.2

Prefunding. Each operating day, each participant must fund its opening position requirement in the CHIPS Prefunded Balance Account at the Federal Reserve Bank of New York. Funding opens at 9:00 p.m. ET the evening before and should be done by 9:00 a.m.3 A participant cannot send a CHIPS payment until it has funded.
Checks and queue. A bank sends an ISO 20022 payment message. CHIPS validates it, then places it in a queue.
Release by the algorithm. A liquidity-saving algorithm releases payments one by one or offsets them bilaterally or multilaterally, so that no participant's position ever falls below zero.
Final settlement. On release, CHIPS debits the sender's position and credits the receiver's position on its ledger. The payment is final and irrevocable.
End of day. At the 6:00 p.m. ET cutoff, CHIPS nets what remains. Banks with a closing requirement have 30 minutes to send a Fedwire transfer. Positive balances are paid out by Fedwire. Unreleased payments expire and can be sent another way.

Source: CHIPS public disclosure, January 2025, and CHIPS Rules, June 4, 2026.

The Clearing House says 95% of payments settle with finality in seconds.1 In 2023, its liquidity efficiency averaged 26:1: each $1 of funding supported $26 of settled payments.2

An illustrative example: Bank A has queued a $50 million payment to Bank B, and Bank B has queued $45 million to Bank A. The algorithm can release both at once. Bank A's position drops by $5 million, Bank B's rises by $5 million, and both payments are final. On a gross system, each bank would need the full amount.

CHIPS vs Fedwire

Both are US dollar wire systems for banks. The difference is who runs them and how they settle.

	CHIPS	Fedwire Funds Service
Operator	The Clearing House, a private company owned by banks1	The Federal Reserve Banks6
Settlement model	Continuous netting by algorithm, against prefunded balances2	Real-time gross settlement, payment by payment6
Finality	Final and irrevocable when released, 95% in seconds1	Final and irrevocable once processed6
Money used	Positions backed by the Prefunded Balance Account at the New York Fed2	Banks' Federal Reserve master accounts8
Hours (ET)	9:00 p.m. the evening before to 6:00 p.m., weekdays3	9:00 p.m. the evening before to 7:00 p.m., weekdays; third-party transfers by 6:45 p.m.6
Participants	43 direct banks in 20264	About 7,300 in 2008, the Board's latest published count6
Main use	Dollar leg of cross-border payments2	Same-day transfers for banks, businesses and government, and settling other clearing arrangements8
ISO 20022	Since April 8, 20245	Since July 14, 20259
Payment reference	Payment sequence number3	IMAD and OMAD8

Verdict

Same finality, different liquidity. Fedwire needs the full amount of every payment. CHIPS settles the same value with a fraction of the funding, and CHIPS itself is funded and paid out over Fedwire.

Some guides say CHIPS settles "once a day" or "is not real time." That was true before 2000. Today, settlement happens payment by payment throughout the day.2 For the general model behind Fedwire, see real-time gross settlement.

CHIPS confirmation number vs Fed reference number

A wire confirmation shows a reference from the rail that carried the payment.

Fedwire: IMAD and OMAD. The Input Message Accountability Data is a date, a source identifier and a sequence number, assigned when the Federal Reserve's Funds Transfer application processes the message. The OMAD uses a destination identifier instead.10 Every successfully processed Fedwire message carries both.8
CHIPS: payment sequence number. CHIPS rules require the payment sequence number of the original message when funds are returned.3 Your bank may call it a CHIPS confirmation or reference number; the rules use this sequence number to identify the original message.
CHIPS UID. It identifies an account, not a payment. It qualifies who gets paid at the receiving bank, in place of a BIC or an account number. Consumer accounts cannot be listed.3

What CHIPS means for an online merchant

You will not connect to CHIPS. But a US dollar wire from abroad, from a buyer, a marketplace or a payment partner, often passes through correspondent banks, and its US leg runs on CHIPS or Fedwire. For the international part, see cross-border payments; for payouts to your bank, see bank payout.

Fig. 1How to read an incoming wire confirmation

Incoming wire · $18,400.00Credited to your US dollar account

Rail: CHIPS credit
Reference: CHIPS payment sequence number (an IMAD on Fedwire)
End-to-end ID: Your invoice number, if the payer added it
Charge bearer: SHAR: each side pays its own bank
Amount received: Lower than invoiced if a bank deducted fees

Illustrative record.

Illustrative example. Labels vary by bank.

Two fields explain most surprises. Under the CRED charge code, every bank in the chain may deduct fees from the amount, and those fees must appear in the charges information. SHAR, the most common code, splits fees between each side's own bank.9 And since July 14, 2025, Fedwire's customer transfers carry a mandatory End-to-End Identification to help the payee reconcile.9 Ask payers to put your invoice number there.

To trace a missing wire, give your bank the reference that matches the rail: the IMAD for Fedwire, the CHIPS sequence number for CHIPS.

Updated on October 15, 2026

Nick Bonnassies

CMO at Tagada

CMO at Tagada. Before Tagada, Nick built direct-to-consumer brands that generated over $115M in sales, raised over $25M in crowdfunding and sold two of them. He also works as a fractional CMO on marketing operations and AI systems.

Frequently asked questions

Is CHIPS a real-time final payment system?

Yes, for most payments. The Clearing House says 95% of CHIPS payments settle with finality in seconds, depending on value, funding and participant controls. Settlement happens the moment a payment is released from the queue, and it is then final and irrevocable. Payments still queued at the 6:00 p.m. ET cutoff are netted in the end-of-day process or expire.

What is a CHIPS confirmation number vs a Fed reference number?

They identify the same kind of event on two different rails. A Fed reference number is the IMAD (or OMAD) of a Fedwire transfer: a date, a source or destination identifier and a sequence number, assigned by the Federal Reserve. A CHIPS confirmation or reference number points to the CHIPS payment message; the CHIPS rules identify that message by its payment sequence number. Give your bank the one that matches the rail.

What does CHIPS credit or CHIPS debit mean on a bank statement?

The label names the rail. A CHIPS credit, or an incoming CHIPS funds transfer, is a wire that reached your bank over CHIPS, often the US leg of an international dollar payment. A CHIPS debit is an outgoing wire your bank sent over CHIPS. Ask your bank for the sender, the reference number and any fees deducted.

Can a business send a payment over CHIPS directly?

No. Only participant banks connect to CHIPS: US commercial banks and foreign banks with a US branch or agency, 43 of them in 2026. A business sends a wire through its own bank, which uses CHIPS, Fedwire or a correspondent bank. Banks that are not participants reach CHIPS through a participant.

What is a CHIPS UID or CHIPS participant number?

A CHIPS UID (Universal Identification Number) identifies an account, such as a business or bank customer of a participant, in the CHIPS Name and Address File. Consumer accounts cannot be listed. A CHIPS participant number identifies the participant bank itself; The Clearing House publishes participant numbers and an ABA-to-CHIPS mapping table.

Is CHIPS open on weekends?

No. CHIPS opens at 9:00 p.m. ET on the evening before each operating day, including Sunday night for Monday, and closes at 6:00 p.m. ET. It does not run on weekends or designated holidays. Fedwire Funds keeps similar weekday hours, until 7:00 p.m. ET.

Sources

Checked October 15, 2026

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