Financial technology trade groups, led by the American Fintech Council, are urging the Federal Reserve to move forward with a plan that would give certain non-bank financial firms direct access to U.S. payment rails.
“A well-designed payment account can expand competition and responsible innovation in payments without introducing new risk,” Phil Goldfeder, CEO of the American Fintech Council, said in a statement on Monday.
A payment account is a limited Federal Reserve account that allows certain financial firms to send and settle payments directly, without granting them full banking privileges.
The push comes as the Fed reviews responses to its Request for Information on whether to test a limited-purpose Reserve Bank account designed for payments activity.
At issue is whether the Fed should offer a narrowly scoped account that allows eligible institutions to clear and settle payments directly on the central bank’s balance sheet without granting a full Master Account.
The proposal would cap overnight balances, pay no interest, bar access to the discount window, and limit use to final-settlement systems such as Fedwire and potentially FedNow.
Fintech groups backing the proposal say the current system requires payment firms to rely on sponsor banks, which they argue increases costs, slows settlement, and concentrates operational dependencies.
These groups are looking at the payment account as a way to provide direct settlement access without extending lending authority or deposit-taking functions. Bank trade groups, however, see it differently.
Banking on the status quo
In a joint submission filed last week, the Bank Policy Institute, The Clearing House Association, and the Financial Services Forum warned that the proposal represents a fundamental policy shift by enabling uninsured or lightly supervised institutions to connect directly to the Fed’s balance sheet.
The banks argue that even with balance caps and other limits, Payment Accounts could still increase run risk and financial instability by supporting deposit-like activity outside the federal safety net.
They explicitly flag stablecoin issuance and other crypto-adjacent models as examples of activities that resemble deposit-taking but lack deposit insurance, resolution regimes, and consolidated supervision.
While the proposal does not mention crypto explicitly, banks argue that stablecoin issuers and crypto-linked institutions are among the most likely beneficiaries of a tailored account that allows direct settlement in central bank money.
The joint letter also addresses how it sees access to Fed accounts as being historically conditioned on federal deposit insurance and rigorous prudential oversight, precisely to prevent the risks now being flagged.
Allowing a streamlined pathway for uninsured institutions, the banks argue, could draw customer funds away from banks, raise funding costs, and weaken credit intermediation.
The banks also raised concerns about anti-money laundering, sanctions compliance, and operational resilience if non-banks are granted direct settlement access.
The debate follows a series of legal setbacks for Custodia Bank, which has continued to press its case for direct Federal Reserve access after courts ruled the Fed has broad discretion to deny Master Account applications.
As a Wyoming-chartered crypto bank, Custodia has stood its ground, arguing that the Fed’s stance effectively blocks innovative banking models, while regulators and courts have sided with the Fed’s authority to prioritize financial stability and risk management over applicant eligibility alone.
While the Fed has framed the Payment Account as an exploratory prototype, how it resolves the competing arguments could signal whether the central bank is prepared to redraw the boundary between banks, fintechs, and crypto firms operating in the U.S. payments ecosystem.
