[JumpCrisscross]

> do have an amount cap per day

This is related to fraud risk, which is only ameliorated by net-settlement systems in that they're slower. (An RTGS with a built-in delay would have a similar fraud profile.)

Wires' immutability makes them both ideal for large transactions and more risky for fraud. If I understand correctly, FedNow payments are reversible.

In essence, you have to pick two among fast settlement, immutability and low cost. FedWire is fast and immutable and low cost at volume. FedNow is fast and low cost. ACH is stupid.

[lxgr]

It helps with fraud, sure, but I bet banks aren't too unhappy about the dampening effect it has on liquidity flows as well, especially now that we've left ZIRP?

There must be some cost of capital associated with needing reserve buffers for outgoing instant payments sent outside of the operating hours of the interbank money market and the Fed discount window.

In the end, both effects (cost of fraud and cost of liquidity) will of course get baked into the cost per dollar to the banks and it might be hard to untangle them.

[JumpCrisscross]

> banks aren't too unhappy about the dampening effect it has on liquidity flows

Correct.

The average FedWire is $5.4mm [1]. The Fed Funds rate is 5.3% [2]. ACH settles in 1 to 3 business days [3]. Actual/360, that's $800 to 2,400 to finance wholesale.

If, on the other hand, you're JPMorgan and can pay 2 bps for deposits [4], that cost drops to $3 to 9. These are the economics that drive bank consolidation.

[1] https://www.frbservices.org/resources/financial-services/wir...

[3] https://www.frbservices.org/resources/resource-centers/same-...

[2] https://fred.stlouisfed.org/series/fedfunds

[4] https://www.chase.com/content/dam/chase-ux/ratesheets/pdfs/r...