The Federal Reserve is exploring the introduction of a "skinny" master account that would give access to basic Fed payment services to fintechs and other providers that currently have to work with third-party banks, says Governor Christopher Waller.
Speaking at the Fed’s first Payments Innovation Conference, Waller says that the skinny, or "payment account", could be beneficial to firms focused on payments innovation that may not want or need all the "bells and whistles" of a master account, or access to the full suite of Federal Reserve financial services.
The account would provide access to the Fed payment rails but, unlike masters accounts, would not pay interest on balances, could include balance caps, and would not provide daylight overdraft privileges or discount window access.
Says Waller: "The idea is to tailor the services of these new accounts to the needs of these firms and the risks they present to the Federal Reserve Banks and the payment system. Accordingly, and importantly, these lower-risk payment accounts would have a streamlined timeline for review."
Fed staff have been instructed to examine the idea and will engage with interested stakeholders to hear perspectives on the benefits and drawbacks.
Penny Lee, CEO of the Financial Technology Association welcomed the idea: “While we look forward to working with the Federal Reserve Board on the development of this proposal, we agree that providing well-regulated payment innovators with access to the federal payment infrastructure is important for America's financial future."
Elsewhere in his speech, the Governor touted a "new era" for the Fed in payments, touting the rise of stablecoins, tokenisation and AI, and noting that "the defi industry is not viewed with suspicion or scorn".
"It's worth noting that the firms engaged in these activities include banks, asset managers, retail payments firms, technology companies, as well as crypto-native fintechs. This is an acknowledgement that distributed ledgers and crypto-assets are no longer on the fringes but increasingly are woven into the fabric of the payment and financial systems," says Waller.