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How “Skinny Accounts” Could Provide a Boost to the U.S. Financial System

When you hear the word “skinny,” you might think of jeans, Ozempic or a song by Billie Eilish. But to the Federal Reserve Board, it represents a proposed type of payment account that would expand access to transaction settlement services and turbocharge the payments industry, but also challenge the established banking hierarchy.

Currently, most non-bank payment firms cannot settle directly with the Federal Reserve. Instead, they depend on sponsor banks with Fed Master Accounts to access the Fed’s settlement services. While this arrangement works, it introduces three major frictions at scale:

Economic drag, driven by sponsor fees and duplicated treasury, ledger, and compliance stacks.
Operational dependency, which can slow product changes and complicate incident response.
Concentration risk, as growing payment volumes are routed through a shrinking pool of sponsor banks.

One proposed solution is the creation of “skinny” (or “Payments”) accounts. A payments-only account at the Fed for qualified, supervised non-bank payment institutions excludes many of the privileges associated with Fed Master Accounts, reducing these frictions without introducing new risks.¹

What Makes an Account “Skinny”

Unlike Fed Master Accounts that provide banks and credit unions with full transaction settling services (along with interest and storing reserve capabilities), the Payments Account prototype is considered “skinny” because it is narrowly scoped to payment settlements. Risk containment is central to the design and relies on a combination of controls:

Payments-only purpose: Used solely to clear and settle the institution’s own payment activity.
No safety-net access: No access to the discount window, intraday credit, or daylight overdrafts.
Structural risk controls: Payments are prefunded, overdrafts are automatically rejected, and overnight balances are capped.
Limited services: Access only to select payment services such as the Fedwire Funds Service, the National Settlement Service, the FedNow Service, and the Fedwire Securities Service for Fee Transfers only. Prohibited services include the FedACH Services, check services, FedCash, and the Fedwire Securities Service for Transfer Against Payment.

When the Fed’s public comment period closed on Feb. 6, clear battle lines were drawn. Nonbanks were unsatisfied with the lack of amenities proposed. Traditional finance, on the other hand, voiced concerns that the proposed controls were not strict enough. Federal Reserve Board Governor Waller quipped, “everyone is yelling at me,” but he reaffirmed his resolve to have payments accounts “done by the end of the year.”²

Eligibility and Applicability

Under the Federal Reserve Act, any institution that is already legally eligible for Federal Reserve accounts or services may request a Payment Account. Applications would be evaluated by the relevant Reserve Bank under streamlined Account Access Guidelines in 90 calendar days or less, reflecting the account’s narrower scope and lower risk profile. Institutions would be limited to just one account type with the Fed, either Master or Payment.

So, who stands to benefit from Payment Accounts? Two main use cases come to mind:

Digital Asset Banks and Federally chartered fintechs would be able to reduce third-party sub-custodian dependencies, lowering cost, complexity, operational risk, and settlement failures, especially critical for institutions bridging traditional and digital asset ecosystems.
Stablecoin issuers would be able to facilitate direct, real-time settlement across exchanges, retail businesses, and wholesale commerce: streamlining issuance, redemption, and cross-party transactions regardless of banking relationships.

Global Experience: Access With Constraints

Comparable models already exist in other jurisdictions such as the United Kingdom,³ the European Union,⁴ Singapore,⁵ India,⁶ Australia,⁷ and Canada,⁸ where non-bank participation such as stablecoin issuers, fintech payment platforms, and digital wallet providers, is expanded under tight safeguards. The common denominator is not open access, but controlled and supervised access. Though many of these programs are less than a couple years old, initial reporting indicates that the three major frictions noted above are reduced.

Bottom Line

Skinny accounts are a form of payments modernization with explicit guardrails, not a deregulatory move. If introduced through a phased rollout, with strict eligibility criteria and measurable resilience standards, they could improve:

Competition by lowering unit costs for payment firms and merchants/consumers.
System reliability by providing faster settlements.
Supervisory visibility through standardized data and telemetry without expanding the federal safety net or introducing new sources of credit risk.

Critics of the skinny account proposition cite two main detractors:

High operational, compliance (especially regarding money laundering and illicit finance), and cyber-resilience standards that not all firms can meet.
The potential for current sponsor banks to lose fee-based revenue.

However, one of those detractors partially answers the other. Sponsor banks will still be able to serve firms seeking to use FedACH, that more closely benefit from the traditional model, or cannot yet meet the required standards. Bank-FinTech partnerships would remain essential for deposit-taking, credit provision, liquidity management, compliance, and broader financial intermediation, with skinny accounts serving as a complementary settlement tool rather than a complete substitute.

Special thanks to Evelyn Basham for her contributions to this article.

Footnotes:

1: “Request for Information and Comment on Reserve Bank Payment Account Prototype,” Federal Register, (December 23, 2025).

2: Volkova, Maria, “Fed’s Waller: ‘Everyone is yelling at me’ on skinny accounts,” American Banker, (February 9, 2026).

3: “Access to UK payment systems for non-bank payment service providers,” Bank of England, (April 8, 2025).

4: “Eurosystem sets policy on access by non-bank payment service providers to its central bank payment systems,” European Central Bank, (July 19, 2024).

5: “Non-Bank Financial Institutions to have Access to FAST and PayNow,” Monetary Authority of Singapore, (November 20, 2020).

6: “Access for Non-banks to Centralised Payment Systems (“CPS”),” Reserve Bank of India, (July 28, 2021).

7: “Payments System Regulation and Policy Issues,” Reserve Bank of Australia, (2024).

8: Mukherjee, Promit, “Bank of Canada begins registration of payment service providers,” Reuters, (November 1, 2024).