The Fed Has Proposed an Account That Cannot Overdraft, Earn Interest, or Reach ACH. Fintechs Have Wanted One for Years.

A master account at a Federal Reserve Bank is the thing that separates institutions that settle payments directly with the central bank from those that must rent access through a partner bank. Getting one has been slow, discretionary and, for nontraditional applicants, frequently unsuccessful. On May 20, 2026, the Federal Reserve Board proposed a narrower alternative: a special-purpose Payment Account, widely referred to as a skinny master account.

The comment period closed on July 27, 2026. The Board has not published a final decision. Because the proposal is complete and public, what it would and would not permit can be read directly.

What the account would allow

A Payment Account could be used for the clearance and settlement of the account holder's own proprietary payment activity, and the holder could act as an intermediary bank. Fedwire Funds and FedNow transactions would be permitted.

What it would not allow

• No FedACH. The automated clearing house handles payroll, bill pay and most recurring consumer payments — a significant omission.
• No correspondent or respondent banking activity.
• No overdraft. Accounts must be prefunded.
• No discount window access and no intraday credit.
• No interest paid on balances.
• A closing balance cap of $1 billion.

Who could apply

The proposal does not change who is legally eligible. Access remains limited to institutions eligible under the Federal Reserve Act or another federal statute, which in practice means firms holding a bank charter. What changes is how applications are handled. The Board proposed a three-tier framework: Tier 1 covers federally insured depository institutions and receives the least scrutiny; Tier 2 covers institutions that are federally supervised but not federally insured; Tier 3 covers state or federally chartered institutions that are not federally supervised and receives the most scrutiny.

Applications would be reviewed within 45 days for Tier 1 applicants and 90 days for Tier 2 and Tier 3. A Congressional Research Service summary characterised the proposal as promising streamlined approval typically within 90 days, against a current process that has run far longer.

The dissent

The Board stated that it would not impose additional anti-money-laundering requirements on Payment Account holders, while reserving discretion to verify compliance. Governor Michael Barr dissented from the proposal, saying it did not sufficiently provide safeguards against money laundering and terrorist financing.

That disagreement is the substantive one. Supporters of broader access argue that forcing nonbank payment firms to settle through a correspondent bank adds cost, delay and a single point of failure. Critics argue that direct central bank settlement is a privilege attached to supervision, and that extending it to institutions outside the federal supervisory perimeter weakens the screening that comes with it.

Why the ACH exclusion matters

Fedwire and FedNow move money in real time and are built for high-value or instant transfers. FedACH is the batch system underneath ordinary consumer finance — direct deposit, recurring bills, most account-to-account transfers. A firm with a Payment Account but no FedACH access would still need a bank relationship for the bulk of everyday consumer payment volume, which limits how much of the partner-bank model the proposal would actually displace.

This article explains a pending regulatory proposal and is for informational purposes only.