At a time when we can stream movies instantly and get same-day deliveries, American consumers and small businesses should not have to wait days for a direct deposit to clear or a vendor check to arrive in the mail. In advanced economies worldwide, people tap to pay instantly, move money as easily as sending a text, and settle business expenses in real time. But in the United States, consumers still wait days for payments to arrive, and businesses often operate on paper-based systems that slow payments, add costs, and increase fraud risks.
It’s time to upgrade our payments infrastructure to leverage innovative technologies that reflect how Americans live and work today. The U.S. needs a comprehensive approach to payments modernization that enables faster transactions, lowers costs, drives innovation, and delivers seamless experiences. That starts with providing payment-focused firms with direct access to the Federal Reserve’s clearing and settlement systems.
Current State of Play: Majority of Payment-Focused Firms Lack Access to Fed Services
In the U.S., Federal Reserve payment rails are the foundation for moving money and enabling modern commerce. Entities with direct access via a Federal Reserve Master Account can use the following key rails, among other services:
- FedACH: Largest volume rail that processes batches of lower-value payments (like direct deposits, payroll, bill payments, and recurring transactions). The ACH network (including FedACH) transferred 93 trillion dollars in 2025.
- FedWire: Handles large, high-value transfers in real time during business hours. Processed over 217 million wires in 2025.
- FedNow: Provides 24/7/365 instant settlements for smaller, everyday transactions. Settled over 8 million payments in 2025.
Most payment-focused firms lack direct access to Master Accounts and these Fed rails, forcing them to settle transactions through intermediaries. This creates unnecessary complexity, fragments the ecosystem, limits competition, and increases the risk of reliance on single entities.
The cost disparity is stark: Entities with direct access to Fed rails pay only a fraction of a cent per transaction, while payment firms are charged significantly more to facilitate the same transactions. These costs ultimately flow through to merchants and consumers.
Next Steps: Upgrading Our System to Provide Viable Paths for Payment Firm Access
We need to establish a path for well-regulated payment firms to gain direct access to Federal Reserve payment rails and to prioritize the safe, secure, and widespread adoption of a real-time payment network. Here are several ways the U.S. can modernize its systems:
- Broad chartering authority and approvals so that entities applying for diverse chartering options (e.g., ILCs, trust charters, state-based charters, and national bank charters) can achieve federal regulatory oversight and a path to apply for and be granted a Fed Master Account. More than 30 master account applications are pending, with half submitted in 2024 or earlier, and some dating back to 2020.
- While the Federal Reserve’s recently introduced Payment Accounts proposal (also known as the “skinny master account”) is a welcome step forward, it excludes access to the most widely used payment rail, FedACH, limiting critical payment use cases. We support the Fed in expanding access to FedACH and pursuing tailored risk-management strategies to better support the value and benefits of the skinny master account proposal.
- Enact new pathways to payment rail direct access, such as an optional federal payments charter that would allow state-licensed money transmitters to apply for such access, subject to appropriate and tailored regulatory requirements.
| Payments Explained: How Payment-Focused Firms are Regulated
Payment companies, including money transmitters, are subject to entity- and activity-based regulations. They must comply with key federal and state consumer protection laws and regulations covering anti-money laundering, privacy, fair treatment of customers, and electronic fund transfers. Money transmitters are required to obtain licenses in the states where they operate. Their regulators conduct examinations, impose capital and liquidity requirements, and enforce consumer protection laws. Notably, funds are protected by state licensing laws that require money transmitters to maintain reserves equal to the amount of consumer funds they hold, and only in the form of certain low-risk assets, such as U.S. Treasury securities. Alternatively, some payment-focused firms partner with banks to offer services or are chartered banks themselves. These entities are generally subject to the same consumer protection laws as money transmitters. However, their capital and liquidity requirements, as well as other expectations, may differ depending on their charter and eligible activities. |
Payments Modernization Will Drive Competition, Lower Costs, and Speed Up Payments
Direct access for payment-focused firms would lead to several key benefits and enhance the stability and resilience of the U.S. payments ecosystem.
- Lowering Costs. When the UK granted payment firms access to its real-time system, one global payment company cut customer costs by 20% and reduced transaction speeds from 15 minutes to just 20 seconds.
- Boosting Innovation. Direct access enables payment-focused firms to build and deploy new products faster, accelerating innovation that would deliver better outcomes for end users while keeping the U.S. payments system competitive globally.
- Increasing Transparency. Modern payment technology improves process transparency, letting consumers and small businesses easily track and use their funds.
- Strengthening Resilience. Just two banks originate nearly 50% of U.S. ACH transactions. Allowing payment firms to participate directly diversifies access and strengthens overall system resilience.
- Fighting Fraud. Direct settlement improves end-to-end payment traceability. This simplifies payment chains, clarifies accountability, and provides regulators with better visibility into payment flows to detect and prevent fraud.
Unlocking the Next Era of Financial Innovation and Prosperity
The U.S. has long been at the forefront of financial innovation, from the first credit cards to ATMs and the rise of digital assets. Now is our opportunity to lead once again by upgrading our financial infrastructure to enable safe, reliable, and direct money transfers at a lower cost. If we build a system that prioritizes consumers, not legacy institutions, we can unlock the next era of financial prosperity.
Additional Resources
- Davis Polk: The future of payments and banking under the Trump administration
- Sivon, Natter & Wechsler: Faster Payments at Less Cost and Lower Risk: The Case for Allowing Nonbank Payment Processors Direct Access to Federal Reserve Payment Systems
- Milken Institute: The Case for Payments Modernization
- Davis Wright Tremaine: Federal Reserve Proposes Skinny Master Accounts
ABOUT US
The Financial Technology Association (FTA) is a network of fintech leaders shaping the future of finance. We champion the power of technology-driven financial services to catalyze innovation and advocate for modernized policies and regulations that reflect the digital transformation.