How Proposed ‘Skinny’ Fed Accounts for Fintechs Could Alter U.S. Payments
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Fintechs, including cryptocurrency companies, increasingly want membership cards in the Federal Reserve’s payments network. In Washington, where rules are being rethought, rewritten, set aside or reinterpreted, there’s a good chance they will have a shot at that credential, and becoming a stronger source of competition for legacy players.
Fintechs are eager for the change because of their dependence on traditional banks when they process their payments through a sponsor institution. Traditional players already have keys to the system through “master accounts” with Federal Reserve district banks.
The Fed did issue guidance several years ago governing how various tiers of financial providers could obtain master accounts. But in practice the fintechs found it a difficult path.
Why this matters: Master accounts are powerful instruments, zealously staked out by traditional players and guarded by a risk-conscious Federal Reserve. Moving ahead would create another crack in traditional institutions’ structural advantages in payments.
How it could happen. Fed Governor Christopher Waller, with a specialty in payments issues, has pushed the idea of a “skinny” payments account, sort of a “master account lite.”
Broadly, Waller and his allies want to clear the way for more payments innovation: “I believe we can and should do more to support those actively transforming the payment system,” he said in an fall 2025 speech.
Meanwhile, the growing number of special national trust charters being issued by the Office of the Comptroller of the Currency and special charters issued by some states are intensifying the focus on this idea. Each nonbank granted a skinny account will gain direct access to parts of the Fed system. At the very least, that means a lost client to a bank.
Need to Know:
- In a December 2025 request for information, the Fed outlined a prototype for the skinny payments account as a basis of discussion. The period for public comments closed in early February.
- Based on a wide sample of comment letters, just about the only thing banks and fintechs agree on is the need to ensure that skinny accounts adhere to anti-money-laundering compliance requirements and related considerations.
- Otherwise, the gap is huge: Banks favor a tightly controlled account structure — at least as stringent as proposed, if not more so. Fintechs crave something even more liberal than the Fed set out in its prototype.
- Banks clearly see a risk that a skinny account could fatten over time and have asked that any prototype include procedures for shutting it down.
Basics of the Fed’s Prototype Skinny Account
The Fed’s idea is to grant skinny accounts that would be used expressly for clearing and settling the company’s payment activity. In part, the Fed’s thinking is that some institutions don’t want and don’t need the full menu of benefits that a regular master account would bring. The Fed proposal describes it as a “tailored, special purpose” account.
The arrangement would be set up in a way to minimize the credit, operational and other risks that fintech accounts pose to the Federal Reserve.
A key sweetener: The approval process would run on a 90-day clock, far faster than the nonbank master account application process. In its comments, the Conference of State Bank Supervisors called the proposal a big upgrade over the current process, which it termed “opaque, lengthy, and open-ended.”
More specifically, the proposed skinny account includes these provisos:
- Skinny accounts would have access to certain Fed payment services, such as Fedwire and FedNow, but not some other options, including FedACH and checking services.
- Holders of payment accounts would not have access to the Fed’s discount window that holders of master accounts enjoy.
- Nor would they have access to intraday credit from the reserve bank holding their accounts. These arrangements are called “daylight overdrafts.”
The result: Outgoing transactions from fintechs’ accounts that would result in an overdraft would be rejected. - Skinny account holders would be required to pre-fund payments with their own money, rather than that of customers. However, to reduce potential exposure to the Fed, overnight balances in the accounts would also be capped. A limit put forth for discussion’s sake was $500 million, or 10% of the account holder’s total assets.
- While holders of master accounts receive interest on deposits, holders of payment accounts would not.
- As proposed, a company holding a skinny payment account would not be permitted to also hold a master account, and holders of a payment account would not be allowed to function as a correspondent “bank” for other fintechs and nonbanks needing payment access.
Read more: Your Bank Will Lose Customer Accounts Without a Digital Asset Strategy
Why Do Fintechs Want Skinny Fed Accounts?
Among the fintech and crypto fraternity, there’s a strong desire to get disentangled from banks.
• The Financial Technology Association commented: “Generally, only legacy banks have direct access to Federal Reserve clearing and settlement infrastructure, requiring well-regulated payment firms to bear frictions, costs, and delays of operating indirectly through sponsor institutions.”
• The Crypto Council for Innovation described the current approach of fintechs relying on banks as a “fragmented framework” that “forces these companies to negotiate, develop, and maintain distinct legal agreements, operational policies, and technical integrations with each partner, with the resulting additional partnership fees, transaction costs, and operational overhead ultimately passed on to consumers.”
• Global payment power Stripe didn’t pull its punches and made it clear what it wants is the opportunity for an end run: “Direct connections to payment systems enable us to reduce dependency on third parties with aging, unreliable technology stacks to provide safe and efficient services to businesses of all sizes with fewer points of failure.”
• Coinbase, the cryptocurrency powerhouse, made the argument that the new accounts could improve U.S. payments competitiveness.
“Many jurisdictions — such as the United Kingdom, European Union, Brazil, and India — already permit certain nonbank financial institutions to access central bank payment infrastructure, which has accelerated competition, reduced settlement risk, improved payment speed and reliability, and fostered innovation in payments,” Coinbase wrote.
• The American Fintech Council, which includes both fintech and bank membership, criticized the Fed’s either/or idea of offering a skinny payment account or master account, but not both.
One example where both might be needed: Companies that offer payments in both fiat currency and in stablecoins. “These institutions may find it necessary to maintain a separate payment account for their stablecoin activities while also holding a master account associated with their traditional payments activities”
Read more: Policy, Partnerships, and Payments Rails Will Define Fintech’s Next Act
What the Fintechs and Crypto Firms Would Really Like
Running through comments from the nonbanks is the theme that the Fed proposal doesn’t go far enough and that it won’t encourage the innovation the Fed anticipates because the skinny accounts are, well, too skinny.
It’s too limited. Coinbase wrote: “While we support expanding access to Federal Reserve services, the limitations envisioned in the request for information — including limits on permitted services, low balance limits, and the absence of interest on end-of-day balances — would be overly restrictive and unduly impair the payment accounts’ usability.”
Stripe said the proposal would be of limited use for an operation like itself that is already scaled and global. The company wants to see more liberal features made available to firms that can put up sufficient reserves to address the Fed’s safety and soundness concerns.
It’s not enough. The Financial Technology Association pushed for access to FedACH. The reasoning: Many fundamental payment use cases, including payroll, billpay and recurring consumer and business payments, require that functionality.
What nonbanks really want: Fintechs also worry that, should they gain access to skinny accounts, that will preclude eventually getting access to real master accounts. Ultimately, reading between the lines, that’s what they want.
The FTA called for a process that would facilitate “graduation” from the skinny accounts to full master accounts.
That’s something the banking lobby opposes vigorously.
Read more: The War Over Crypto ‘Rewards’ is a Distraction. Get Ready for the Age of Stablecoins Now
What Banks Hate About Skinny Accounts
A particularly aggressive comment letter from the think tank Better Markets attacked the Fed’s proposal: “The Fed should not be expanding the selection of services it offers just to satisfy the wishes of the crypto industry. Unlike banks which tremendous benefit to our economy, crypto companies have no benefit or legitimate purpose and so far have only seriously harmed retail investors and facilitated a range of criminal activities.”
Don’t hand fintechs an advantage. The Independent Community Bankers of America, for example, called for a limited rollout. “ICBA has repeatedly emphasized that access to Federal Reserve accounts should remain tied to strong prudential oversight and that lightly regulated entities should not receive the same comprehensive access as insured depository accounts.” ICBA also worries that because the firms aren’t necessarily regulated as strictly as banks that the proposed accounts could help them compete against smaller banks without the regulatory costs that they face.
Level the playing field (again). Banking groups also don’t want to see skinny accounts becoming a entrée to full master accounts. ICBA, for example, insisted that any fintech given a master account be required to pay for federal deposit insurance.
The American Bankers Association supported expanding the proposal’s bar on fintechs providing correspondent-like payment services to other fintechs. “Extending that prohibition to ‘nesting’ arrangements — where an applicant provides payment services to third parties that themselves offer bank-like services whether they are actual financial institutions or not — will help prevent the circumvention of the payment account’s limitations and ensure that risk does not reenter the payment system through an indirect channel.”
The Coming Power Shift
A joint letter from the Bank Policy Institute, The Clearing House and the Financial Services Forum pointed out that the proposal will significantly change the balance in the financial services business over time.
They said: “These uninsured institutions may be able to increase their customer base, which would in turn increase the number of consumer accounts at uninsured institutions. The Federal Reserve must carefully consider the implications for payment and financial system safety and soundness that could result from this potential shift to benefit uninsured institutions before implementing this framework.”
