CHIPS (CHIPS)
CHIPS is a private-sector clearing and settlement system for high-value US dollar payments, operated by The Clearing House. Unlike Fedwire it nets: it matches and offsets payments continuously so participants can settle very large volumes with far less funding.
Also called: Clearing House Interbank Payments System
The Clearing House Interbank Payments System handles large-value domestic and cross-border dollar payments for commercial, treasury, correspondent banking and institutional flows. Its defining feature is a liquidity-saving mechanism: rather than settling each payment gross as it arrives, CHIPS matches and offsets payments continuously, which The Clearing House describes as letting participants settle large payment volumes with substantially less funding than a gross-settlement model. Once a payment is released and settled it is final and irrevocable.
The system carries more than $2 trillion of average daily value across several hundred thousand transactions a business day, with a liquidity efficiency ratio the operator put at roughly 26:1 in 2025 — the practical meaning of netting, expressed as a number.
CHIPS sits alongside Fedwire rather than competing with it. Fedwire is operated by the Federal Reserve, settles gross across accounts at Reserve Banks, and is where a payment goes when funding certainty matters more than liquidity efficiency. A very large share of the world’s cross-border dollar payments touches one of the two before reaching a beneficiary.
In practice
Participation in CHIPS is limited and indirect access is the normal case: a non-US institution reaches dollar clearing through a correspondent that is a participant. "We clear through CHIPS" from a non-bank almost always means a correspondent relationship, and the terms of that relationship are what actually govern the service.
Example
A dollar payment from a European bank to a US beneficiary is sent to the European bank's US correspondent, which releases it into CHIPS. The beneficiary's bank receives it, and the two correspondents' net position is settled — not two gross movements of the full amount.
Commonly confused with
| Term | How it differs |
|---|---|
| Fedwire | Fedwire is the Federal Reserve's real-time gross settlement system. CHIPS is privately operated and nets, which is why the two have different liquidity profiles. |
| ACH | ACH is the US batch system for low-value credits and debits. CHIPS is high-value and continuous — different economics, different rulebooks, different use cases. |
| CIPS | Similar acronym, different currency and country: CIPS clears renminbi under People's Bank of China supervision. |
See also
- FedwireFedwire is the Federal Reserve’s real-time gross settlement system for US dollar wires. Each payment is settled on its own, for its full amount, across the banks’ accounts at the Federal Reserve, and it is final the moment it settles.
- ACHACH is the batch system for domestic bank-to-bank debits and credits in the United States. Payments are grouped into files, exchanged between banks and settled on a processing schedule rather than one at a time, which makes ACH cheap, slower than a wire, and reversible within defined return windows.
- RTGSRTGS stands for real-time gross settlement: a system that settles each payment individually and finally in central bank money, rather than offsetting many payments against each other and settling only the difference at the end of a cycle.
- NettingNetting is offsetting mutual obligations so that only the difference actually moves. Two parties that have been paying each other all day settle one payment for the net amount, which cuts both the funds transferred and the liquidity each side must hold to support them.
- Correspondent BankingCorrespondent banking is an arrangement in which one bank holds deposits for another bank and makes and receives payments on its behalf, normally so the second bank can reach a currency or a market where it has no branch or license of its own.
- SettlementSettlement is the point at which value actually moves between parties and the obligation between them is discharged. It is a separate step from clearing, which only works out who owes what, and from finality, which is the moment the transfer can no longer be reversed.