Fed Proposes Limited 'Payment Account' for Nonbanks, Tightening Access to Core Payment Systems

The U.S. Federal Reserve has proposed a new, limited 'payment account' to allow non-bank financial institutions direct access to its core payment systems like Fedwire and FedNow.

To manage risk, these accounts come with strict limitations: they will not earn interest, have no access to Fed credit or the discount window, and will be subject to balance caps.

This move is a response to the rapid growth of instant payments and political pressure to modernize the financial system, balancing innovation with the need for strong safety and soundness regulations.

The U.S. Federal Reserve has officially proposed a new type of account designed specifically for non-bank financial technology firms.

This new 'payment account' is the Fed's answer to a rapidly changing financial world. With the explosion of instant payment services like The Clearing House's RTP network and the Fed's own FedNow, there's growing pressure to allow more companies, especially fintech innovators, to connect directly to the core infrastructure of the U.S. payment system. Currently, most of these firms have to partner with traditional banks to process payments, which can add cost and complexity. This proposal aims to create a more direct and efficient path.

However, this new access comes with very strict guardrails. First, these payment accounts will not earn interest. While traditional banks earn interest on the reserves they hold at the Fed (IORB), these new accounts won't, removing any subsidy. Second, account holders will have no access to Fed credit, meaning no emergency loans from the discount window or intraday overdrafts. Third, there will be a cap on balances, likely up to $1 billion, to limit the potential impact on the Fed's balance sheet and monetary policy. These rules are designed to let fintechs in without giving them the full safety net that comes with a traditional banking charter.

This proposal is caught between two powerful forces. On one side, the White House recently issued an executive order encouraging regulators to expand nonbank access, adding political momentum. On the other, there is significant pushback from within the Fed itself. Governor Michael Barr dissented from the proposal, arguing that the safeguards against money laundering and terrorist financing (AML/CFT) are not strong enough for firms that the Fed doesn't directly supervise. This tension between promoting innovation and ensuring financial stability will be the central debate as the final rule is drafted.

The path to this moment was paved by several key events. A federal court decision affirmed the Fed's authority to set its own terms for account access, strengthening its hand. More recently, the Kansas City Fed's temporary approval of an account for the crypto firm Kraken created a real-world precedent, highlighting the urgent need for a consistent, system-wide policy. The final rule, expected in the second half of 2026, will determine just how wide this new door for fintech will open.

Fedwire: The Federal Reserve's primary electronic funds transfer system, used by banks for large-value, time-sensitive payments.
IORB (Interest on Reserve Balances): The rate of interest the Federal Reserve pays to banks on the reserve funds they hold at the Fed.
AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism): A set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.

Fed Proposes Limited 'Payment Account' for Nonbanks, Tightening Access to Core Payment Systems

The U.S. Federal Reserve has proposed a new, limited 'payment account' to allow non-bank financial institutions direct access to its core payment systems like Fedwire and FedNow.

To manage risk, these accounts come with strict limitations: they will not earn interest, have no access to Fed credit or the discount window, and will be subject to balance caps.

The U.S. Federal Reserve has officially proposed a new type of account designed specifically for non-bank financial technology firms.

Fedwire: The Federal Reserve's primary electronic funds transfer system, used by banks for large-value, time-sensitive payments.
IORB (Interest on Reserve Balances): The rate of interest the Federal Reserve pays to banks on the reserve funds they hold at the Fed.
AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism): A set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.