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The Clearing House: CHIPS Saved Users $4.9 Billion in 2023

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The Clearing House said its CHIPS system saved participants $4.9 billion in 2023.

Those savings were derived from the CHIPS (Clearing House interbank payment system) liquidity savings algorithm to the tune of $13.8 million per day, The Clearing House (TCH) said in a Tuesday (April 2) news release.

“These savings are proving especially relevant following an unprecedented cycle of monetary tightening and rising interest rates,” TCH said. “The liquidity efficiency of CHIPS averaged 26:1 in 2023, meaning that $1 contributed to the network in funding supported $26 in settled value, with most payments settling in mere seconds. This contrasts with the average of 6.6:1 liquidity efficiency in other major large-value payment systems around the world.”

TCH said that the economic value to participants and the industry from the liquidity efficiency of CHIPS can be approximated by examining the cost of routing CHIPS payments, which last year averaged $1.8 trillion per day, through less liquidity-efficient payment channels. 

“By comparing the costs to maintain additional reserves to support this alternative payment routing, relative to the return experienced by CHIPS participants by deploying these resources more productively through lending and investment activities, the estimated economic value of the CHIPS network can be quantified,” TCH said.

In addition to these benefits, TCH said CHIPS’ offering lets participants and their customers deploy scarce liquidity more flexibly, something that’s especially valuable during times of stress and heightened financial stability risk.

“As significant as these benefits may be, we know from simulation analysis and empirical experience that the liquidity savings on CHIPS increases when additional volume is contributed to the network,” said Richard Dzina, senior vice president, product development, The Clearing House. “We therefore believe that there is greater value to glean for the industry as we add more participants to the network and as existing participants send more payments to CHIPS.”

Last month, TCH reported that transaction volume on the Electronic Payments Network (EPN), The Clearing House’s private sector ACH network, rose 8% in 2023, with the network processing more than 19 billion transactions worth $52.4 trillion during the year.

This growth outpaced that of the overall U.S. ACH network, which rose by 4.8% in 2023, as businesses and consumers gravitate toward electronic payments. 

“The desire from businesses and consumers for easier and faster electronic payments is driving the increase in ACH payments along with instant payments, and we do not see this trend slowing in the years to come,” Jason Carone, senior vice president of ACH product management at The Clearing House, said in a news release at the time.