Federal Reserve Requests Comments on Proposal Detailing Payment Account

Key Takeaways

• The Federal Reserve Board of Governors (FRB) Proposal to establish “payment accounts” largely adopts the framework from the FRB’s December 2025 Request for Information (RFI), including limiting eligibility to institutions already eligible for a Reserve Bank master account and restricting access to FedACH.
• The Proposal contains several new details and modifications including an individualized approach to determining an account holder’s closing account balance and further details on information the Federal Reserve Banks may request regarding an account holder’s or applicant’s risk controls, including results from Bank Secrecy Act (BSA)/anti-money-laundering (AML) examinations and third-party risk assessments regarding compliance with these requirements.
• The FRB may modify its approach in light of an Executive Order released the day before the Proposal, which requests that the FRB conduct a comprehensive evaluation, accompanied by a report, that includes an assessment of options for expanding Federal Reserve payment accounts’ and services’ access to fintechs.
• Comments are due by July 27, 2026. In the meantime, the FRB encourages the Reserve Banks to pause their review of access requests from Tier 3 institutions until the FRB has completed its policy development process concerning the payment account.

On May 20, 2026, the FRB issued a series of Federal Register Notices (collectively, the “Proposal”) that would establish a “payment account” that legally eligible financial institutions could use for clearing and settling payments. The Proposal builds off the FRB’s December 2025 RFI that first outlined the concept of a payment account and largely adheres to the framework previewed in the RFI while containing important details on how the FRB plans to operationalize payment account features and the application and review process.

While the Proposal would not expand eligibility for Reserve Bank accounts, it represents an important step in providing clarity for fintechs with novel banking charters who have historically faced long wait times in the review of their applications. Additionally, the Proposal was published only a day after a long-rumored Executive Order directing the FRB to review expanding account access for uninsured depository institutions and non-bank financial companies, raising the possibility that the FRB may take additional action to expand access to payment accounts and services beyond those outlined in the Proposal.

Similarity in Framework and Limitations

As previewed above, the Proposal largely sticks to the payment account framework outlined in the RFI. The Proposal would offer eligible institutions access to Reserve Bank accounts subject to restrictions designed to limit operational risk, including no access to the discount window or intraday credit, no interest paid on balances, and a prohibition on payment account holders acting as correspondent banks. Payment accounts would be distinct from Reserve Bank master accounts, which do not contain similar restrictions.

The Proposal contains the same eligibility criteria for payment accounts as those detailed in the RFI, limiting eligibility to institutions that may already apply for a master account. This currently includes Federal Reserve member banks, insured depository institutions, and entities eligible to make an application to become an insured depository institution. Eligibility would ultimately be at the discretion of each Reserve Bank.

Consistent with the RFI, the Proposal would also restrict account holder access to Reserve Bank services that cannot automatically reject transactions that would cause an overdraft. In other words, while holders of the new payment account would gain access to Federal Reserve services including Fedwire, FedNow, the National Settlement Service, and the Fedwire Securities Service, they would not have access to FedACH. As noted in the Proposal, the lack of access to FedACH services could limit certain use cases for payment accounts, given the prominence of ACH in payroll, bill payments, and business-to-business payments.  

While the eligibility and usage restrictions on the payment account may limit uptake, eligible institutions will likely see benefits in the form of faster application review when compared to the process for traditional master accounts, as outlined below.

New Details and Modifications

While the Proposal retains a similar framework and limitations to the RFI, it contains several new details that will be important for entities that are considering applying for a payment account. 

First, the Proposal carries over from the RFI the expectation that a Reserve Bank’s review of a request for a payment account generally should be completed within 90 calendar days of the Reserve Bank receiving all required documents from the applicant. In addition, the Proposal would add an expectation that Reserve Banks will review requests from insured depository institutions (which are classified as Tier 1 institutions in the FRB’s August 2022 Account Access Guidelines) within 45 calendar days of receiving required documentation for both payment and master account access. This would be a departure from the approach in the current Account Access Guidelines, which do not specify any timeline for application review.  

The Proposal states that, in general, a request for a payment account will receive a more streamlined review relative to a request for a full master account from an institution in the same tier of the Account Access Guidelines.

Second, the Proposal reworks the cap on a payment account’s closing account balance. While the RFI contemplated a hard cap of the lesser of $500 million or 10 percent of an account holder’s assets, the Proposal moves to an individualized approach where Reserve Banks would set limits for each account holder based on the account holder’s expected payment flows and subject to a $1 billion hard cap. These individualized caps would be reevaluated at least annually by the Reserve Bank.

Third, the Proposal describes the risk controls and conditions that would apply to payment accounts. It notes that most institutions that would be eligible for a payment account are generally already required to maintain a comprehensive AML program under the BSA, required to comply with Office of Foreign Assets Control (OFAC) sanctions requirements, and are subject to examination by a state or federal regulator for compliance with these requirements.

The Proposal states that Reserve Banks may request the results of these examinations from account holders and applicants and may request additional information on an account holder’s BSA/AML and OFAC compliance programs, including an independent third-party assessment that the account holder’s BSA/AML and OFAC compliance programs are consistent with the terms in the Account Access Guidelines.

Lastly, the Proposal clarifies that the payment account would be operationalized through amendments to the Account Access Guidelines, the FRB’s Policy on Payment System Risk, Regulation D (to specify that interest will not be paid on account balances), and Regulation A (to restrict account holder access to the discount window). Payment accounts would be subject to the terms set forth in the Reserve Banks’ operating circulars and any other agreements governing the provision of Reserve Bank accounts and services.

Next Steps

The Proposal represents the most concrete step the FRB has taken toward operationalizing the concept of a payment account, which first appeared in a speech by Governor Christopher Waller in October 2025, and suggests that the FRB is moving toward finalizing its approach to these accounts this year.

In the meantime, the FRB encourages the Reserve Banks to temporarily pause decisions on access requests from institutions that fall within Tier 3 of the Account Access guidelines, consisting of institutions that are not federally insured or subject to federal prudential oversight. The Proposal states that the pause is “expected to end on or before December 31, 2026,” which aligns with anticipated action on the payment accounts Proposal.

The FRB may take additional action as a result of the May 19 Executive Order, which, among other items, requests that the FRB conduct a “comprehensive review” of access to accounts at Reserve Banks for uninsured depository institutions and non-bank financial companies, along with submission of an accompanying report by mid-September 2026. It is unclear how the Proposal and the Executive Order will develop in parallel. The submission of any FRB report would be completed after the current comment period on the Proposal closes. It is possible the FRB could delay any action to finalize payment accounts until it has submitted this report.

In addition, the report requested in the Executive Order goes beyond the contours of the Proposal. For example, the Executive Order asks the FRB to evaluate “whether, and if so to what extent, each of the 12 Reserve Banks has legal authority to act independently of the FRB in granting or denying access to Reserve Bank payment accounts and payment services.” While the Proposal would continue the FRB’s current course of granting discretion to the Reserve Banks in application approval, it is possible the FRB could modify this approach in light of the Executive Order. For example, the FRB could consider “regulations or policies . . . to ensure that covered firms are evaluated on a consistent basis” across the Reserve Banks.

Practical Implications

The Proposal represents another step by the FRB in reevaluating how innovative companies are granted access to payment rails, while acting within the existing legal framework governing account access at Reserve Banks.

While awaiting final action from the FRB, entities seeking a payment account should evaluate whether their current structure meets the eligibility requirements outlined in the Proposal. Interested parties should also make sure they fully understand the restrictions that a payment account would impose, as compared to a full master account.

We will continue to monitor developments resulting from the May 19 Executive Order.