WASHINGTON, Oct 21 (Reuters) - The U.S. Federal Reserve is studying the creation of a new account that would provide access to Fed payment services for firms that currently rely on third parties like banks for that access, a senior official said on Tuesday.
Fed Governor Christopher Waller said the so-called "payment account" is a prototype idea that could grant access to firms seeking to utilize the Fed for payment services, without granting them full access to the services and backstops the Fed provides to banks. Waller said the idea is just a prototype currently and could change. But it could provide broader access to Fed payment services typically reserved for banks, potentially opening the door to fintechs and other firms that have sought entry into the system, but faced resistance from a Fed wary of providing master accounts typically reserved for banks to less intensely regulated institutions.
"Payments innovation moves fast, and the Federal Reserve needs to keep up," he said in opening remarks at a daylong payments conference hosted by the central bank.
Waller, who chairs the Fed's internal payments committee, detailed how these "skinny" master accounts might work, granting firms access to the Fed's payments infrastructure without accompanying services and backstops. For example, the account could be limited in size, not pay interest, and not allow for overdrafts. The accounts also may not have access to the Fed's discount window for emergency lending, but could receive streamlined reviews, he added.
"The payments landscape, as well as the types of providers, has evolved dramatically in recent years, and, accordingly, a new payments account could better reflect this new reality," said Waller.
Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Andrea Ricci
