Fintech Groups Push Federal Reserve for Limited Payment Accounts Amid Banking Concerns

Financial technology trade groups led by the American Fintech Council are urging the U.S. Federal Reserve to move forward with a proposal that would grant certain non-bank financial firms direct access to the nation’s core payment rails. The initiative centers on the creation of a narrowly defined “payment account,” a limited Federal Reserve account that would allow eligible firms to send and settle payments directly without receiving full banking privileges.

Supporters argue that a well-structured payment account could boost competition and innovation in the U.S. payments system while avoiding additional systemic risk. According to American Fintech Council CEO Phil Goldfeder, the proposal offers a way to modernize payments by reducing reliance on sponsor banks, which fintech companies say increases costs, slows settlement times, and concentrates operational risk within a small number of large institutions.

The Federal Reserve is currently reviewing feedback from a formal Request for Information on whether to test this limited-purpose Reserve Bank account. Under the proposal, the account would be tightly restricted: overnight balances would be capped, no interest would be paid, access to the Fed’s discount window would be prohibited, and usage would be limited to final-settlement systems such as Fedwire, with potential access to FedNow.

Fintech advocates view the payment account as a middle ground that enables direct settlement in central bank money without extending lending authority or deposit-taking rights. However, major banking trade groups strongly oppose the plan. In a joint submission, organizations including the Bank Policy Institute and The Clearing House warned that allowing uninsured or lightly supervised institutions to connect directly to the Fed’s balance sheet would mark a fundamental policy shift.

Banks argue that even with strict limits, payment accounts could encourage deposit-like activity outside the federal safety net, increasing run risk and threatening financial stability. They also raised concerns about anti-money laundering controls, sanctions compliance, and operational resilience if non-banks gain direct settlement access. Stablecoin issuers and other crypto-linked firms were cited as likely beneficiaries, despite lacking deposit insurance and consolidated supervision.

The debate unfolds against the backdrop of ongoing legal disputes involving Custodia Bank, a Wyoming-chartered crypto bank that has challenged the Fed’s authority to deny direct account access. Courts have so far upheld the Fed’s broad discretion in prioritizing financial stability.

While the central bank has characterized the payment account as an exploratory concept, Federal Reserve Governor Christopher Waller recently signaled that a pared-down “skinny” master account with limited payments functionality could be rolled out by the end of the year. How the Fed ultimately decides may redefine the boundary between banks, fintech companies, and crypto firms in the U.S. payments ecosystem.