2007 Annual Report

Providing Confidence in Times of Turmoil

With spikes in payment volume often prevalent in times of economic stress, the Federal Reserve strives to ensure that payments can be made in a secure, reliable and timely fashion. Removing uncertainty about the payment system gives confidence to financial institutions and results in more stable and efficient markets.

A stable and healthy U.S. payments system depends on providing financial institutions with secure, reliable access to Fedwire®, FedACH® and Check 21 Services. By operating several channels that provide electronic access to these services, the Customer Relations and Support Office (CRSO) at the Chicago Fed helps support an efficient payment system.

The ongoing evolution of the Federal Reserve's FedLine® access channels helps to provide greater usability through enhanced operating speed, efficiency, security and reliability, which in turn help foster secure and stable operations for the nation's payment system. These channels are designed to help support stable, efficient payment operations for the smallest to the largest financial institution.

The Federal Reserve is continuously seeking ways to incorporate contemporary technologies into its offerings in order to help financial institutions better manage their payments business, and has introduced two such large-scale upgrades to IP-based technologies. In recent years, the CRSO has also led the migration of more than 7,000 financial institutions to the new systems.

In 2006, the CRSO completed the migration of customers from the now-retired DOS-based FedLine® platform to the Web-based FedLine Advantage® access solution. The focus has now shifted to managing the migration of computer-to-computer interface customers to an IP-based solution called FedLine Direct®. This solution plays a critical part in the day-to-day operations of high-volume financial institutions.

CUSTOMERS APPRECIATE SUPPORT DURING CONVERSION

Both of these recent efforts to migrate to IP-based technologies have helped position the Federal Reserve as a leader in innovative technology offerings that meet financial institutions' needs for reliable and secure payment operations. The U.S. Postal Service and Agribank were among the first to migrate to the FedLine Direct access solution and realize the benefits of the Federal Reserve's next-generation technology.

The U.S. Postal Service uses the Federal Reserve's FedACH Services to handle an average of 2.5 million ACH transactions per month for payroll and other payments to its approximately 700,000 employees. Its high transaction volume made the U.S. Postal Service a natural candidate to complete its migration to FedLine Direct as soon as it became available.

Streamlined technical support and maintenance are key benefits for financial institutions as they migrate to FedLine Direct, said Richard Kotenberg, project manager in the U.S. Postal Service's Data Transfer group.

"It allows us to upgrade to take advantage of current technology," he explained. "There's more flexibility in this type of solution."

The U.S. Postal Service's IP-based FedLine Direct connection has been up and running since the third quarter of 2006.

One of the first financial institutions to use FedLine Direct to conduct Fedwire Funds transactions was AgriBank, a unique institution cooperatively owned by 18 regional farm credit associations in 15 states. AgriBank facilitates wholesale loans and other financial services to promote agriculture and agribusiness.

Because FedLine Direct was designed to integrate with financial institutions' existing systems, the migration resulted in almost no changes to AgriBank's daily operations. Now that the migration is complete, AgriBank uses FedLine Direct to process an average of 8,500 wire transfers per month.

IMPROVING THE CAPABILITIES OF A VARIETY OF PRODUCTS

Innovative technology is not the only area in which the Federal Reserve receives high marks from financial institutions. Customer satisfaction surveys show financial institutions appreciate the Federal Reserve's efforts to develop and deploy contemporary technology to improve the capabilities and benefits of FedACH, Fedwire Funds, Check and FedCash Services, Account Management Information (AMI) and FedLine Advantage.

“There's more flexibility in this type of solution.”

In addition, being able to continue operations during emergency situations is one of the most important aspects of the support provided to financial institutions. The Federal Reserve maintains business continuity plans to address possible operational threats and has undertaken rigorous contingency planning and testing to help ensure resiliency.

The Federal Reserve also provides advice and direction to financial institutions to help ensure they have plans in place to help maintain the flow of electronic payments. Recommended contingency arrangements include back-up personnel, alternate Internet Service Provider (ISP) and access connection setup, and substitute network components and arrangements.

These efforts and others help to contribute to an efficient payment system, which in turn helps to support well-functioning financial markets. Helping make both resilient and effective will drive the efforts of the Federal Reserve Bank of Chicago and the CRSO in the coming year and well into the future.