Banks Press Fed on Oversight as FinTechs Seek ACH Access

• Payment Accounts would have a $1 billion closing balance limit and provide no Fed credit, interest, or discount-window access, with 90-day target review periods for Tier 2 and Tier 3 applicants
• Banks argue direct access could divert deposits and payment activity away from community banks and want stronger BSA/AML oversight for non-federally insured institutions receiving accounts
• FinTechs emphasize that FedACH processed $104.06 trillion in 2024 and propose prefunding, balance limits, and phased implementation as alternatives to complete exclusion from ACH services

Summary: Banks Press Fed on Oversight as FinTechs Seek ACH Access

Key Development:

The Federal Reserve's proposed Payment Accounts (OP-1878) would allow eligible institutions direct access to Fed payment services without full Master Account privileges. The July 27, 2026 comment deadline has revealed sharp divisions between traditional banks and FinTech firms.

Proposal Details:

• Payment Accounts would access Fedwire Funds, FedNow, National Settlement Service, and Fedwire Securities
• Excluded: FedACH access, intraday credit, discount-window access, and interest on balances
• Maximum balance limit: $1 billion under normal circumstances
• Target review timelines: 45 days for Tier 1 institutions, 90 days for Tier 2/3 institutions
• Overdrafts would be automatically rejected

Banking Sector Concerns:

Traditional banks, including Bank of Colorado, PriorityOne Bank, and American Commercial Bank & Trust, argue that:

• Direct Fed access without comparable prudential supervision creates unfair advantages
• Could divert deposits and payment activity away from community banks
• Non-federally insured institutions should face mandatory BSA/AML and OFAC compliance requirements
• Initial balance and account limits should be strictly enforced

FinTech Position:

The Financial Technology Association contends that excluding FedACH severely limits the accounts' usefulness, noting:

• FedACH processed $104.06 trillion in payment value in 2024
• ACH handles critical functions: payroll, direct deposit, bill payments, government disbursements
• Two banks controlled approximately 50% of U.S. ACH transactions in 2024
• Proposes alternative safeguards including prefunding, real-time balance verification, and phased implementation

Market Implications:

The Fed's final decision will determine competitive dynamics between traditional banks and FinTechs in payment processing and could reshape payment system concentration.