CHIPS

CHIPS stands for Clearing House Interbank Payments System. It is a system for settlements between banks in US dollars. It is owned by a private clearing house controlled by large banks. Its participants are banks, mostly American or with branches in the USA.

How it works

Banks send payment orders to CHIPS. The system does not settle each payment separately: it offsets opposing amounts and settles the difference. This netting saves banks liquidity: a large turnover needs less money in the accounts.

Fedwire works differently. It is a system of the US Federal Reserve in which each payment is settled immediately and separately. SWIFT does not settle payments at all: it is a messaging network through which banks send each other instructions.

Where it is used

An international payment in dollars as a rule goes through settlement in the USA. Your bank sends a message, the payment then moves along a chain of correspondent accounts, and one of the steps often goes through CHIPS or Fedwire. A company does not deal with CHIPS directly: only participating banks have access.

What to watch for

A dollar payment passes through several banks, and each checks it under its own rules. If there is a link to Russia anywhere in the chain, the payment may be delayed, blocked or returned at any step. That is why many contracts are switched to other currencies, and dollar payments are planned with particular care.

In a deal through a broker, we select the route and the currency for the specific payment and tell you in advance if the dollar route is not working at the moment. More details: Payment route selection.