Fed may open payment rails to non-banks

The Federal Reserve Board staff is looking into opening access to the Reserve Bank-operated payment rails to nonbank financial technology firms. Board Governor Christopher Waller made the news public in remarks given at the kickoff of a payments innovation conference in Washington, D.C., on Tues., Oct. 21, 2025.

"[W]e are well into a technology-driven revolution in payments, and I am here to say that the Federal Reserve intends to be an active part of that revolution," Waller told the assembled payments executives.

Introducing 'skinny' master accounts

Waller said he has asked the Fed's staff to "explore" the idea of establishing a "payment account," to provide "basic" Federal Reserve payment services to "legally eligible institutions" that now work through third-party financial institutions that maintain master accounts with the Fed. Master accounts are what banks and credit unions use to access clearing and settlement services through the Reserve Banks.

Waller characterized the new category of accounts as "skinny" master accounts. There would likely be several distinctions between these "skinny" accounts and full-fledged master accounts.

For example, the Fed wouldn't pay interest on balances. Balances likely would be capped. No so-called "daylight overdraft" privileges, which FIs can incur during the business day. Nor would the accountholders be eligible to borrow money through the Fed's discount window, which FIs access to meet short-term liquidity needs.

Still, it is potentially a big deal because master accounts serve as a moat of sorts that separates insured FIs from the rest of the financial world.

"There are many eligible firms engaged in substantial payments activities that may not want or need all the bells and whistles of a master account, or access to the full suite of Federal Reserve financial services, to successfully innovate and provide services to their customers," Waller said.

"The idea," he added," is to tailor the services of these new accounts to the needs of these firms and the risks they present to the Federal Reserve Banks and the payment system. Accordingly, and importantly, these lower-risk payment accounts would have a streamline timeline for review. Payments innovation moves fast, and the Federal Reserve needs to keep up."

A 'prototype' idea

Waller's remarks weren't without caveats. "[T]his is just a prototype idea," he cautioned. And the staff is only exploring it.

It's also worth noting that the Fed doesn't have much of a track record for moving fast. For example, while much of the business world operates on a 24/7/365 schedule, the Fedwire funds transfer service and the National Settlement Service (which the Reserve Banks use to facilitate payments finality) operate 22 hours a day, five days a week. They go dark on Sundays and national holidays when those holidays fall on weekdays.

In August of this year the Fed Board proposed extending those hours to 22 hours a day, six days a week; Sundays would be added to the schedules as well as weekday holidays. Even if approved, however, that change wouldn't go into effect until 2028 or 2029, according to a staff memo outlining the proposal.

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