The Federal Reserve published a Request for Information (RFI) at the end of 2025 for a Payment Account prototype that would introduce a new form of direct settlement access to the central bank settlement system by offering a limited settlement account to firms that meet strict requirements. The comment period closed in February, with broad engagement. Feedback was mixed, with many supporting the concept while also raising risk-focused critiques and recommending ways to make the framework safer, more functional and more efficient. Here, we explore the proposal and its implications, including the risk discipline required of institutions pursuing this form of access.
The Federal Reserve published a Request for Information (RFI) at the end of 2025 for a Payment Account prototype that would introduce a new form of direct settlement access to the central bank settlement system by offering a limited settlement account to firms that meet strict requirements. The comment period closed in February, with broad engagement. Feedback was mixed, with many supporting the concept while also raising risk-focused critiques and recommending ways to make the framework safer, more functional and more efficient. Here, we explore the proposal and its implications, including the risk discipline required of institutions pursuing this form of access.
An implementation of the Fed’s Payment Account proposal, even if refined through the comment process, would represent a meaningful shift in how participation in core settlement infrastructure is structured, risk-controlled, and monetized. It would not change who is eligible to participate in the Federal Reserve system, but it would reshape the terms of participation and the level of control maturity required to support it.
The new layer of settlement access has the potential to reallocate core risk and control responsibilities between eligible non-bank institutions pursuing direct settlement and the sponsor banks that intermediate them today. Institutions seeking this form of access will be required to demonstrate operational readiness, compliance capability, liquidity discipline, and governance maturity. Firms that underinvest in these areas risk failing to qualify or operate effectively, while firms that deliberately prepare may gain operational leverage and a competitive advantage.
For the banks that presently serve access-seeking institutions, the proposal raises different questions around economics, risk allocation, and competitive positioning.
The Federal Reserve is not the first central bank to introduce a restricted payment account for non-bank institutions. Other jurisdictions have already implemented similar models, providing a useful benchmark for evaluating both the opportunity and the associated risks.
The UK opened central bank settlement accounts to licensed non-bank Payment Service Providers (PSPs) in 2017, followed by Singapore in 2020, and the ECB in April 2025, with a similarly restricted, risk-based access framework.1 In each case, access was extended not to unregulated fintech firms, but to entities operating under clearly defined, centralized supervisory regimes. By the time the Fed’s proposal was published, the US was roughly eight years behind these markets, and the core question of whether non-bank institutions should have some form of direct access had already been resolved through formal regulatory frameworks elsewhere.
What makes the US path more challenging is the patchwork of state-by-state money transmitter licensing and the absence of any unified non-bank oversight framework comparable to those in the EU and Singapore. The US is not charting new territory; it is navigating familiar questions through a more fragmented regulatory landscape.
Today’s Federal Reserve master accounts represent full participation in the central bank settlement ecosystem, with access to a broad range of services, responsibilities, oversight, and associated privileges.
The Fed’s initial Payment Account proposal threads the needle between innovation and risk control, introducing a stripped-down version that would allow eligible institutions to clear and settle payments without accessing further privileges and without taking on systemic leverage: 2
Feedback during the comment period was divided predictably along institutional lines. Firms focused on innovation pushed back on the restrictions, while those focused on risk control, including institutions that stand to lose intermediation revenue, were broadly supportive of the limited scope. Where the Fed ultimately lands will reflect its own risk calibration – for example, regarding whether balance limits are tied to payment activity rather than assets and whether there should be more prescriptive compliance monitoring requirements.
Crypto firms and trade groups, along with some industry advocates, broadly praised the concept as forward-looking but urged refinements to make the account more usable, such as offering broader services, adjusted balance limits, some interest on balances, and clearer expectations around anti-money laundering (AML) and countering the financing of terrorism (CFT).3,4
Fintech trade groups also backed the proposal to reduce structural barriers to payment system access. However, some felt the scope “should remain limited to the clearing and settlement of the accountholder’s proprietary payment activity,” with a design that ensures expanded access does not introduce new systemic or prudential risks.5
Banks of all sizes, along with traditional financial institutions such as credit unions, also generally supported the concept of a restricted payment account while reinforcing the importance of risk controls. They agreed with the limited scope – e.g., no overdrafts or discount window – to preserve systemic safety. However, they argued for additional guardrails such as enhanced supervisory information, operational risk controls, AML/CFT/Banking Secrecy Act/sanctions screening safeguards, and careful eligibility reviews.6,7,8
Banking as a Service (BaaS) institutions require special consideration in this analysis, particularly those that generate significant revenue and funding from fintech settlement intermediation services. Banks with a high concentration of fintech clients could experience noticeable client migration as some institutions pursue direct access, potentially creating a material balance sheet impact rather than the gradual earnings pressure more diversified banks might experience.
The same structural drivers apply to some community and mid-size banks. A diversified national bank may absorb the loss of a fintech sponsorship client with limited disruption, whereas a mid-size bank with two or three large fintech relationships could experience a more pronounced impact if those clients migrate.
Credit unions are sometimes overlooked in the current debate. While larger credit unions are legally eligible for Federal Reserve access by statute, most rely on corporate credit unions and correspondent relationships rather than direct participation due to cost, complexity, and operational burden. Larger institutions may begin to evaluate whether that model remains optimal as access frameworks evolve, while those with exposure to fintech program deposits could see shifts in liquidity profiles if settlement models change.
Big Tech enters the equation as a potentially significant strategic factor. The Fed’s proposal does not broaden eligibility, but if an eligible affiliate of a large platform operator sought direct access, the competitive consequences could extend beyond fee compression, including accelerated sponsor disintermediation, increased concentration of payment flows within a handful of platforms, and intensified competition for both clients and deposits. Institutions should consider how they would perform in a scenario in which the market status quo is profoundly disrupted.
The Fed has been clear that its proposal does not seek to broaden eligibility for a payment account. Instead, its impact will depend on how existing standards are applied to this new model in practice. These include the Federal Reserve’s Account Access Guidelines, BSA/AML and sanctions expectations, and payment system risk requirements tied to prefunding and intraday liquidity discipline. While these frameworks are not changing, the proposal introduces a new context in which they must be interpreted in terms of limited-purpose accounts and payment-focused institutions operating without access to central bank credit.
Comment letters raise questions around how these standards will be operationalized in practice, particularly how eligibility will be interpreted and what level of control maturity will be required for institutions to qualify. As a result, the extent to which this framework affects a narrow or broader segment of the market will depend less on the rule itself and more on how these standards are actually applied. This makes the rulemaking process itself a critical signal for institutions evaluating their strategic positioning.
The Fed’s initial proposal demonstrates a deliberate prioritization of systemic risk control while pursuing ‘safe’ innovation. Prefunding requirements eliminate intraday credit exposure, balance caps limit scale, and the exclusion of selected services constrains operational complexity.
Allowing access to a wider range of institutions will shift where risk is observed and managed. Activities that are currently mediated through sponsor banks, including liquidity management, settlement exposure, and operational dependencies, would become directly visible at the institutional level. Those taking advantage of the payment account framework may benefit from reduced reliance on banking intermediaries and potentially lower settlement costs, but doing so means they assume direct responsibility for meeting supervisory expectations and operating under continuous operational scrutiny.
For those seeking access, this reframes the strategic question. The gating factor is not just legal eligibility, but operational and control maturity. Organizations considering whether to seek access should evaluate their internal capabilities. For example, can they:
Each question identifies a capability that most non-bank payment firms do not yet maintain in a form that is demonstrable to regulators. There can be a big gap between having a policy addressing these capabilities and having systems that can evidence operational readiness.
Forecasting intraday liquidity at this level requires real-time position visibility, automated funding triggers, and settlement systems that perform under stress. Operating without central bank credit requires liquidity discipline that can survive abnormal markets.
Demonstrating AML and sanctions controls will require embedding screening and transaction surveillance directly into payment workflows at scale, rather than layering monitoring tools to existing infrastructure. Governance, in this context, must be embedded in system architecture rather than addressed through periodic policy updates.
Firms that assume that simply refreshing policies and vendor contracts will satisfy supervisors are likely to find that the bar is materially higher than they anticipated. The cost of identifying gaps during supervisory review will almost certainly exceed addressing them in advance.
Building toward a higher regulatory maturity is not a short-cycle effort. Developing the underlying capabilities requires sustained investment over multiple quarters, if not years, depending on the starting point. At the same time, the rulemaking process introduces a period of uncertainty in which standards are still being defined, but strategic positioning decisions cannot be deferred indefinitely.
The comment period has closed, but the final rule is not imminent, and the political environment adds real risk. Congressional interest in payment infrastructure access has not historically run in the direction of expansion, and Federal Reserve independence is under greater scrutiny than it has been in years. Institutions should already be evaluating their market positioning, charter strategy, and capability development, recognizing that those who wait for full regulatory clarity may find themselves reacting rather than shaping their position as the framework evolves.
Read the next part of this series to explore how institutions can evaluate their exposure to the changing settlement environment and the potential impact on bank revenue streams – as well as how they should be repositioning themselves in response.
References
1 Decision - EU - 2025/222 - EN - EUR-Lex
2 https://www.federalregister.gov/documents/2025/12/23/2025-23712/request-for-information-and-comment-on-reserve-bank-payment-account-prototype
3 https://www.federalreserve.gov/apps/proposals/comments/FR-2025-0083-01-C71
4 https://www.federalreserve.gov/apps/proposals/comments/FR-2025-0083-01-C79
5 https://www.federalreserve.gov/apps/proposals/comments/FR-2025-0083-01-C67
6 https://www.federalreserve.gov/apps/proposals/comments/FR-2025-0083-01-C54
7 https://www.federalreserve.gov/apps/proposals/comments/FR-2025-0083-01-C81
8 https://www.federalreserve.gov/apps/proposals/comments/FR-2025-0083-01-C56
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