The Federal Reserve Board recently voted 6-1 to advance a formal proposal that would create a new type of payment account — a streamlined, special-purpose route for fintech firms and other nontraditional financial institutions to access the Fed's payment rails directly, without going through a traditional bank intermediary.

The proposal would allow fintechs, stablecoin issuers and other nonbank institutions to clear and settle payments directly through the Fed.

The proposal, released in May and now open for a 60-day public comment period, represents the most significant shift in the Fed's approach to payment infrastructure access in years.

If you are a fintech company, a payments innovator, a stablecoin issuer or a bank that currently serves as a correspondent for these firms, this matters — a lot.

Here is what happened, what it means and what you should be doing about it.

A "Skinny" Account for Payments Innovators

The concept traces back to a prototype that Fed Gov. Christopher Waller introduced late last year — a so-called skinny, payments-focused alternative to the Fed's traditional master accounts.

In December, the board published a request for information seeking public feedback on the idea, and it received 72 comment letters spanning the full spectrum of views.

The proposal released May 20 operationalizes that concept. Under the new framework, eligible institutions could obtain a payment account to clear and settle transactions directly over certain Fed payment services — specifically, the Fedwire Funds Service, the FedNow Service, the National Settlement Service and the Fedwire Securities Service for transfers free of payment.

In plain terms: Firms that qualify would be able to move money themselves, rather than relying on a partner bank to do it for them.

What the Payment Account Is — and What It Is Not

This is not a full master account. The proposal deliberately limits the scope of these accounts to minimize risk while opening up access.

The key guardrails are discussed below.

No Discount Window Access

Payment account holders cannot borrow from the Fed, either overnight or intraday. Transactions that would cause an overdraft are automatically rejected.

No FedACH

The proposal excludes the Automated Clearing House network because the Fed cannot implement automated overdraft-prevention controls for ACH's deferred-settlement, batch-processing architecture without disrupting the network.

Activity-Based Closing Balance Limits Capped at $1 Billion

This is a notable change from the December request for information, which proposed an asset-based cap of $500 million. The board responded to commenter feedback that asset-based limits do not reflect the actual payment needs of high-volume, payments-focused firms.

The new approach ties the limit to an institution's expected payment flows, with the Reserve Bank setting the specific cap for each account — but no higher than $1 billion.

No Interest on Balances

Payment account balances earn zero interest, reinforcing that these accounts are for clearing and settling payments, not for parking value.

No Correspondent-Respondent Relationships

Payment account holders cannot act as correspondents settling other institutions' activity, nor settle their own activity through another institution's master account.

No Excess Balance Account Participation

This prevents institutions from circumventing the zero-interest and balance-limit restrictions.

Who Is Eligible

Eligibility remains tied to existing law.

Any institution that is "legally eligible under the Federal Reserve Act or other federal statute to maintain an account at a Reserve Bank" can request a payment account, per the proposal.

The proposal does not expand statutory eligibility — firms still need a qualifying charter or other legal basis to apply.

That said, the board expects that most applicants will be Tier 2 or Tier 3 institutions under the existing Account Access Guidelines — that is, nonfederally insured institutions that currently face the longest wait times and the highest likelihood of denial.

A Faster Review Process

One of the most practically significant elements of the proposal is timing. Reserve Banks would generally be expected to complete their review of payment account requests within 90 calendar days of receiving all requested documentation.

For Tier 1 federally insured institutions requesting any type of account, the proposed timeline is just 45 days.

Compare that to the current reality for nontraditional institutions seeking master accounts: lengthy reviews, uncertain outcomes and, in several high-profile cases, outright denials that led to litigation.

The Tier 3 Pause

Simultaneously with the proposal, the Fed says it is encouraging its regional Reserve Banks to temporarily pause decisions on access requests from Tier 3 institutions — the highest-scrutiny category, covering nonfederally insured institutions that are not subject to prudential supervision by a federal banking agency.

Approximately 20 such applications were pending as of the proposal date. The board expects this pause to end no later than Dec. 31.

The rationale is straightforward: Give the public time to comment on payment accounts, and ensure consistent implementation across all 12 Reserve Banks before decisions are made on the most complex applications.

BSA/AML and Illicit Finance Compliance

The proposal includes a framework for addressing illicit finance risk. While it does not impose specific Bank Secrecy Act/anti-money laundering requirements as a blanket condition, Reserve Banks would have discretion to require payment account holders to provide information demonstrating compliance with BSA, AML and Office of Foreign Assets Control requirements.

These informational requirements could include independent third-party compliance assessments, attestations, copies of audit reports, regular meetings with the Reserve Bank on compliance issues, and notification of enforcement actions or material deficiencies.

The board is specifically seeking public comment on whether additional mandatory illicit finance requirements should apply to institutions that are not federally insured.

The Executive Order Connection

The proposal arrived the day after President Donald Trump signed an executive order urging the Fed to consider how it can open up its payment rails to more uninsured banks, crypto firms and other nonbank fintechs.

While the board's work on this proposal predates the executive order — the request for information was published in December — the timing underscores the political momentum behind broader access to the Fed's payment infrastructure.

What This Means for You

If you are a fintech or payments company that has been waiting — or has given up on waiting — for a master account, the payment account represents a faster, more predictable path to direct Fed access.

The trade-off is clear: You get speed and certainty, but within a more constrained operational envelope (no ACH, no credit, no correspondent services, etc.). For many payments-focused business models, that trade-off will be attractive.

If you are a stablecoin issuer or tokenization platform, the use cases commenters identified in the request for information are directly relevant: Reserve management, issuance and redemption operations, stablecoin-dollar fungibility, and the settlement of tokenized securities in central bank money all stand to benefit from direct payment rail access.

If you are a bank currently providing correspondent services to fintechs, this proposal could reduce your role as an intermediary.

Multiple commenters noted that direct access through a payment account would reduce counterparty risk, lower costs and increase settlement speed — potentially displacing traditional correspondent relationships.

If you are an in-house lawyer at any of these institutions, three things deserve immediate attention.

First, evaluate whether the payment account's terms — particularly the exclusion of FedACH and the balance limits — are workable for your institution's business model. If they are not, a master account remains the alternative, though with a longer and less certain review process.

Second, prepare your compliance infrastructure. The BSA/AML and OFAC requirements are real, and Reserve Banks will have discretion to demand independent assessments, attestations and ongoing reporting.

Third, engage in the comment process. The board is soliciting input on specific design questions — including whether $1 billion is the right ceiling for closing balances, whether FedNow respondent access should be permitted and whether specific illicit finance requirements should apply to nonfederally insured institutions.

This is a genuine invitation to shape the final rule.

Engage Now

Comments must be submitted within 60 days of publication in the Federal Register, identified by Docket No. OP-1878. They may be filed electronically through the board's website or by mail to the secretary of the board.

Looking Ahead

This is a proposal, not a final rule. The 60-day comment period, the board's review of those comments and the finalization process mean that payment accounts will not be available tomorrow.

But the direction is unmistakable: The Fed is building a structured framework to give payments innovators direct access to its infrastructure, and doing so with unusual speed and political support.

The payment account is narrow by design — no lending, no ACH and no store-of-value function. But for firms whose core business is moving money, that narrowness may be exactly what they need.

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