Knocking at the Fed’s Door: Recent Executive Order and Regulatory Proposals Signal Broader Payment Systems Access for Fintechs and Payment Companies

Direct access to the Federal Reserve’s payment systems has long been the holy grail for nonbank financial institutions and fintech companies, but, to date, efforts to secure it have mostly failed.  This may change following two momentous days in May 2026, when an executive order and Federal Reserve proposal opened the door to broader access to what has been the near-exclusive province of traditional banking organizations.  We summarize these developments below, highlighting key takeaways and questions that remain open. 

Background: Federal Reserve Master Accounts and Payment Systems

The U.S. financial system runs to a large degree through the Federal Reserve.  Its payment systems are the rails over which banks move funds, for themselves as well as for their individual and corporate customers.  There are various parts of the system—including Fedwire Funds (for high-value wire transfers), the FedNow Service (for near-instant retail payments), and FedACH (the Fed’s automated clearinghouse, commonly used for payroll and automatic bill pay transactions)—but there is a common gateway to all: the Master Account.  Master Accounts are deposit accounts held directly at one of the regional Federal Reserve Banks that, among other things, serve as the settlement account for every payment service the Fed offers. 

Providing financial services without a Master Account requires a correspondent or partnership arrangement with an institution that has one, and the modern payments and fintech architecture has evolved around this partnership model, with a Master Account holder “sponsor” providing access to the Fed’s payment rails to nonbank payments and fintech companies, which pay for access and operate largely at the mercy of its sponsor.  Especially in recent years, as sponsor bank arrangements came under significant regulatory scrutiny, many nonbank financial service providers found themselves without recourse when their partner bank decided (or was encouraged to) exit the relationship, or the sponsor business altogether. Accordingly, direct access to the Fed means more than convenience for payments companies and fintechs: it means certainty, consistency, and a measure of competitive parity with incumbent banks. 

After years of pressure, including litigation, to broaden access to Master Accounts, the Board of Governors of the Federal Reserve System (the “FRB ”) released Guidelines for Evaluating Account and Services Requests in August 2022 (the “Account Access Guidelines ”).  These were meant to provide a consistent framework through which Federal Reserve Banks would evaluate requests for accounts and services and, in theory, make access more widely available.¹ The Account Access Guidelines established a tiered review framework:  Tier 1 (for federally insured institutions) receives the least scrutiny; Tier 2 (for uninsured institutions subject to federal prudential supervision or bank holding-company oversight) receives intermediate scrutiny; and Tier 3 (for all others) receives the greatest scrutiny. 

In practice, this tiered framework has not brought about meaningfully broader access to Master Accounts.  To date just one Tier 3 institution that is not a crypto firm (Numisma Bank) has received full Master Account access, and one crypto firm (Kraken Financial) has been approved for a limited-purpose Master Account—out of more than 8,000 active account holders.  Not surprisingly, the payments and fintech sectors have long advocated for more robust reform to the Master Account eligibility standards and application process.  In recent days, these industry priorities may have moved closer to becoming reality.

Executive Order 14405

On May 19, 2026, President Trump signed an executive order titled “Integrating Financial Technology Innovation into Regulatory Frameworks” (the “Order ") that, among other things, targets Master Account access.²

Specifically, the Order asks the Fed to evaluate the legal, regulatory, and policy framework governing access to Federal Reserve Bank accounts and services by uninsured depository institutions and nonbank financial companies, including those engaged in digital assets and other novel activities, and to issue a report on three discrete topics: (a) the FRB’s legal authority to expand Master Account access and options for doing so; (b) existing legal impediments, if any, that the FRB believes prevent direct access and legislative or regulatory changes that would remove them (while mitigating risks to payment systems, financial stability, and the U.S. economy); and (c) whether Federal Reserve Banks have authority to act independently of the FRB in granting or denying access, and, if so, what policies could ensure they do so uniformly.

Moreover, to the extent existing law already permits direct access, the Order asks the Federal Reserve to adopt transparent application procedures and to issue decisions on complete applications for Master Account access within 90 days.  Although phrased as a “request” of the FRB, this 90-day review period would itself mark a sharp break from recent practice, in which applications have sometimes remained pending for years—Custodia’s, for instance, ran from October 2020 to its January 2023 denial. 

The Order also directs six other federal financial regulators to take actions that would make it easier to bring non-traditional financial institutions into the regulatory perimeter in other ways.  For example, the Order requires the agencies to review their existing regulations, guidance, and supervisory practices that “unduly impede fintech firms from entering into partnerships with federally regulated institutions” and to “streamline application processes for eligible fintech firms” seeking regulatory licenses.³

The Federal Reserve’s Proposed “Payment Account”

A day later, on May 20, 2026, the FRB requested public comment on a proposal to establish a special-purpose payment account (the Payment Account) that would allow eligible financial institutions to apply for and receive Fed accounts through which to clear and settle their payments, thereby providing arguably the most important benefits payments and fintech companies would achieve through full Master Account access.⁴ The proposal follows and reflects a December 2025 request for information regarding payment accounts and would be implemented in three ways—through revisions to the Federal Reserve’s Policy on Payment System Risk (the PSR Policy) and Account Access Guidelines, as well as proposed rulemakings to amend FRB Regulations A and D.⁵

Significant features of the proposed Payment Account include:

• Eligibility.  Institutions eligible under the Federal Reserve Act or “other federal statute” could apply to their regional Federal Reserve Bank for a Payment Account.
• Permitted use.  Clearance and settlement of the account holder’s proprietary payment activity and acting as an intermediary bank would be permitted, but acting as a “Correspondent” or “Respondent” as those terms are defined in FRB Operating Circular No. 1 would not be permitted.
• Available services.  Payment Accounts must be prefunded, and thus only services that could not cause an overdraft under the current operating framework would be available.  As a practical matter, this means that Fedwire Funds and FedNow, among other types of transactions, could be effected through a Payment Account, but, notably, FedACH transactions could not.  A large proportion of consumer payments activity occurs via FedACH, and, accordingly, we expect this provision to be a significant point of discussion during the comment period.
• No credit, interest, or excess balances.  Holders of a Payment Account would be limited to transactions that are prefunded and also would not be eligible to access the Fed’s discount window or hold (or earn interest on) excess reserves—benefits that attach to full Master Account status.  So, the Payment Account as proposed would provide most but not all the features of a traditional Master Account.
• Closing balance limits.  A Payment Account would be subject to closing balance limits set by the relevant Federal Reserve Bank based on expected payment activity, capped at $1 billion.
• Illicit finance controls.  Federal Reserve Banks may require evidence that an applicant has a satisfactory Bank Secrecy Act (“BSA”), anti-money laundering (“AML”), and OFAC compliance program in place, even if the applicant is not formally subject to BSA/AML regulatory requirements.
• Review timeline.  Under the proposal, application review periods would be 45 calendar days for Tier 1 requests and 90 for Tier 2 and Tier 3, measured from a determination that the application file is complete and, in every case, subject to extension in a Federal Reserve Bank’s discretion. 

Comments on proposed changes to the PSR Policy and Account Access Guidelines and FRB Regulations A and D notices are due July 27, 2026.⁶

When issuing the proposal, the FRB also encouraged Reserve Banks to pause decisions on any pending applications for Master Account access by Tier 3 applicants until it completes policy development around the Payment Account, which the agency suggested will occur on or before December 31, 2026.  As a result, any non-traditional financial institution currently seeking a Master Account is unlikely to see action on the application until 2027.

The Litigation Backdrop

The FRB’s proposal comes amid ongoing litigation on eligibility for and access to Master Accounts, and these matters will continue to advance in the courts on a separate track. 

To date, federal courts—especially at the appellate level—have been broadly supportive of Federal Reserve Bank discretion to grant or deny applications and broadly skeptical of arguments that Section 11A(c) of the Federal Reserve Act compels Federal Reserve Banks to grant access for all institutions that are legal eligible (which would include most Tier 3 applicants).  In recent months for example, the Tenth Circuit upheld the denial of a master account in Custodia Bank, Inc. v. Federal Reserve Board of Governors,⁷ and the Second Circuit upheld the New York Fed’s termination of an account over BSA/AML concerns in Banco San Juan Internacional, Inc. v. Federal Reserve Bank of New York.⁸ 

This case law supporting Federal Reserve Bank discretion seems to be at odds with the principles animating Executive Order 14405, which at least on its face seeks to reduce such discretion in favor of faster, more transparent application procedures.  Further, it remains to be seen whether a final rule implementing the proposed Payment Account will include standards that seek to override Federal Reserve Bank discretion—and, if so, what the courts will say. 

Key Takeaways and Open Questions

As the comment period progresses, we expect the debate to focus on a handful of issues and questions:

• Continued eligibility restrictions.  The proposed Payment Account would follow current standards for Master Account access and, therefore, is of little use to a payments company or fintech that is not already eligible.  We expect some commenters will seek to secure broader eligibility standards in the final implementing rules.
• An emerging middle ground?  As noted, the proposed Payment Account does not provide all the benefits of a full Master Account, but it is not clear whether this middle ground approach will be enough to satisfy the trade groups representing nonbank financial institutions and fintechs.
• The FedACH wildcard.  Denying Payment Account holders access to FedACH, a very popular method for effecting payroll and bill pay transactions, would be a notable loss for payments and fintech companies.  We expect many comments to request that the final rule include access to FedACH.
• Litigation is likely from both directions.  With litigation over Master Account access already occurring, it would be no surprise to see the final rule draw challenges both from applicants who view the terms as too restrictive and incumbents who view them as too permissive. 

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We will continue to monitor developments in these areas and provide updates as warranted. 

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1. FRB, Guidelines for Evaluating Account and Service Requests, 87 Fed. Reg. 51099 (Aug. 19, 2022).  By statute, access decisions rest with the individual Federal Reserve Banks, not the FRB itself.

2. Executive Order 14405, Integrating Financial Technology Innovation into Regulatory Frameworks, 91 Fed. Reg. 30475 (May 19, 2026).

3. Id. at § 3.  The federal financial regulators directed to take such actions are: the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the National Credit Union Administration, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

4. FRB Press Release, Federal Reserve Board Requests Public Comment on a Proposal to Establish a “Payment Account” (May 20, 2026); see also FRB, Request for Comment on Proposed Establishment of a Payment Account (Staff Memorandum, May 7, 2026).  We note that FRB Governor Barr voted against the proposal and FRB Governor Cook supported it but issued a statement expressing reservations. 

5. FRB, Request for Information and Comment on a Special Purpose Reserve Bank Account Prototype (Dec. 2025).

6. See FRB, Regulation A: Extensions of Credit by Federal Reserve Banks, Docket No. R-1892, RIN 7100-AH24; FRB, Regulation D: Reserve Requirements of Depository Institutions— each with comments due July 27, 2026; Proposed Revisions to the Federal Reserve Policy on Payment System Risk and the Guidelines for Account and Services Requests — comments due 60 days after publication in the Federal Register.

7. Custodia Bank, Inc. v. Fed. Rsrv. Bd. of Governors, 157 F.4th 1235 (10th Cir. 2025).

8. Banco San Juan Internacional, Inc. v. Fed. Rsrv. Bank of N.Y., No. 25-1144-cv (2d Cir. May 13, 2026).