Federal Reserve proposes new payment accounts for fintechs: What's allowed, what's not

The Federal Reserve has proposed creating a new category of payment account that some financial institutions could use to clear and settle transactions. The long-awaited proposal is seen as a next crucial step for fintechs and non-traditional financial institutions seeking direct access to payment systems, which are historically used by banks. The plan stems from earlier work the Fed to study simplified account models, as it looks for ways to give more firms access to its payment network while keeping the financial system safe and stable. Accordingly, the agency said in a statement Wednesday, the proposed account, which is subject to public input, would be “tailored to support innovation” while also “mitigating material risks to the Reserve Banks and payment system,” The Fed had previously floated the idea of a new type of account as crypto and fintech firms pushed for direct access to the agency’s payment systems. Since then, the Kansas City Fed awarded Kraken a limited purpose account, making it the first digital asset bank to gain direct access to the payment infrastructure. As per the initial report, the proposed account could be used for clearing and settling their payments. The Fed said account holders would not have access to intraday credit or the discount window, would not earn interest on balances held at a reserve rank, and would only have access to payment services with automated controls to prevent overdrafts. Fed Governor Michael Barr opposed the plans, saying “the protections remain inadequate.” “I cannot support this set of proposals because it does not provide sufficiently specific and robust safeguards to protect against the accounts being used for money laundering and terrorist financing by institutions we do not supervise,” Barr said. Donald Trump signed an executive order on Tuesday calling on regulators and the Federal Reserve to review rules that may be stifling financial innovation, including whether the central bank could expand fintech access to its payment rails, the systems that move money between banks. The order asks the Fed to join other regulators in reviewing policies that could be updated to support fintech growth. It also calls on the Fed to examine its approach to granting access to payment accounts and services, and to consider options for expanding such access to fintechs and other non-bank firms. (With inputs from Reuters and Bloomberg) Sanchari Ghosh is an Assistant Editor at Mint with over 12 years of experience in journalism, specialising in personal finance, DLT & DeFi, geopolitics and foreign policy, with a particular emphasis on how these areas intersect. <br> She writes extensively about how money works in everyday life—helping readers navigate personal finance decisions. <br> As AI reshapes investing behaviour, capital is increasingly flowing into decentralized ecosystems, redefining how assets are managed, traded, and valued. She focuses on explaining how money flows within frameworks like Distributed Ledger Technology (DLT), DeFi protocols, and crypto markets—while also exploring what the future of money could look like in a trustless, programmable financial world. <br> She also focuses on immigration-related issues, simplifying complex topics around visas, passports, overseas financial planning, and the many practical challenges Indians face while moving or living abroad. <br> Alongside personal finance, Sanchari has a strong understanding of international politics, contemporary and historical conflicts, and global state decisions. She closely tracks how geopolitical developments influence economies, markets, and individual financial choices, bringing together finance and global affairs in her reporting. <br> She began her career as a desk editor, which gave her a strong foundation in news writing. Over time, her interest naturally shifted toward personal finance. Before joining Mint in 2020, she worked DNA, The Times of India, Outlook Money, BloombergQuint, and ETMoney. At Mint, she got an opportunity to expand her coverage to include immigration and geopolitical developments while continuing to closely follow personal finance trends and market movements.As a journalist, she is committed to accuracy, intellectual rigour, and fairness. <br> She is an English Major and her work took her across cities including Delhi, Mumbai, and Pune. Living independently from an early age gave her firsthand experience in managing life and money on her own. This practical exposure sparked her strong interest in personal finance. <br> Outside the newsroom, Sanchari is a sports enthusiast who regularly plays lawn tennis and squash. In her younger years, she was also a national-level badminton player. Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. 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