Fintechs Could Access FedNow and FedACH Under House Pace Act

A bipartisan pair of California lawmakers proposed opening Federal Reserve payment services to qualified financial technology companies, aiming to cut costs and speed up money movement across the FedNow instant payment platform and the FedACH network. A Senate companion has not yet been introduced.

FedNow is an instant payment service operated by the Federal Reserve that lets participating financial institutions send and receive real-time credit transfers. Payments are available around the clock, allowing funds to move in seconds or minutes rather than waiting for end-of-day or next-day processing.

Operationally, a participating institution submits a payment message through FedNow, the receiving institution confirms and posts funds to the recipient, and settlement occurs through Federal Reserve accounts so the transfer is final. Because the service runs 24/7/365, institutions also need to manage liquidity and monitoring outside traditional banking hours.

FedNow differs from FedACH, which supports Automated Clearing House payments that are typically processed in batches with cutoffs and noncontinuous settlement timing. FedNow also sits alongside other real-time options, including The Clearing House’s Real-Time Payments system, which similarly enables always-on instant payments but is operated by the private-sector network rather than the central bank.

Instant payments can benefit fintechs and businesses by speeding access to funds, improving cash-flow management, and making customer experiences feel immediate. Common use cases include payroll and gig payouts, bill payments, insurance claim disbursements, government payments, and time-sensitive transactions such as real estate closings where rapid, confirmed funding can reduce delays.

Adoption can bring both opportunities and challenges: institutions and fintechs may need technical integration work, updated reconciliation and customer-support processes, and strong compliance controls. Pricing typically combines participation or access charges with per-transaction fees and optional charges for certain services, with costs varying based on how an institution connects and which capabilities it uses.

Instant settlement can also raise fraud and error risks because funds move quickly and may be difficult to recover. Institutions often mitigate this through layered authentication, transaction monitoring, customer education, configurable limits, and staged rollouts such as starting with receive-only functionality before enabling outbound payments; practical constraints can also include transaction caps, uneven network reach while participation grows, and feature gaps that institutions may need to bridge with internal tools and policies.

Key Developments: Fintech Access to Fed Payment Rails

• The House proposal would allow regulated nonbank payment providers to connect directly to FedACH and FedNow. The push is bipartisan, and there is currently no parallel bill in the Senate.
• Named the Payments Access and Consumer Efficiency Act, the Pace Act seeks to expand fintech participation in United States electronic payment systems and reduce processing expenses, according to sponsor Rep. Young Kim’s announcement.
• Penny Lee, chief executive officer of the Financial Technology Association, said supervised access to federal payment rails would accelerate transactions, lower fees, and deliver experiences comparable to leading economies.

Context and Reactions: Oversight, Requirements, and Industry Debate

Kim, who represents Orange County, introduced the measure with Democrat Sam Liccardo, whose Silicon Valley district includes part of San Jose. A spokesperson said a Senate version is under discussion.

People should not wait days to reach their own funds or pay extra just to move money. The Pace Act updates the system to speed payments, trim costs, and help families and small businesses keep more of what they earn.

The legislation would require any payment provider seeking access to Federal Reserve services to obtain an Office of the Comptroller of the Currency-approved status as a covered provider, subject to tailored supervision by the Office of the Comptroller of the Currency.

Applicants would need to meet multiple licensing, reserve, and compliance requirements.

Requirement|Description

• Hold money transmitter licenses in at least 40 states — Maintain broad state-level authorization to operate as a money transmitter.
• Maintain one-to-one reserves — Keep customer funds fully backed on a matched basis.
• Satisfy Office of the Comptroller of the Currency standards for risk management and recordkeeping — Meet supervisory expectations for controls, documentation, and operational governance.
• Comply with the Bank Secrecy Act — Follow applicable anti-money laundering and related compliance obligations.
• Be subject to the Equal Credit Opportunity Act — Operate under the relevant fair-lending and nondiscrimination requirements.

In addition, applicants would need to show a clear public benefit, including advancing innovation, fostering competition, and broadening access to payment services.

Some banks have been wary of giving startup payment firms direct entry to central bank services. The American Bankers Association has urged regulators to proceed carefully because of potential consumer risks.

Kim’s office said the bill aims to balance Office of the Comptroller of the Currency oversight with activities scaled to a firm’s business model, avoiding banklike charters for companies that are not banks.

As senior policy adviser Jaliya Nagahawatte noted, the process would not be a rubber stamp; not every fintech walking into the Office of the Comptroller of the Currency would qualify.

The proposal runs alongside a separate Federal Reserve effort launched last year that drew criticism from fintech companies.

In December, the Federal Reserve sought public feedback on a prototype account structure, often called a skinny account, that would let nonbank providers use certain central bank services without the full privileges of a master account held by traditional financial institutions.

Under that draft framework, firms could access FedNow for instant payments and Fedwire for high-value transfers, but not the high-volume FedACH system.

Fintech trade groups, including the Financial Technology Association, criticized the approach because it would still force companies to rely on bank partners to reach the Automated Clearing House network.

Nacha, which governs the Automated Clearing House network, operates the system through two providers: the Federal Reserve and The Clearing House, the latter owned by a consortium of banks. The network handled about 35.2 billion payments totaling roughly $93 trillion last year.

Nagahawatte added that the Federal Reserve’s authority over fintech activity is limited under the National Bank Act, and the Pace Act is intended to redesign the framework to address that gap.

The bill sets timelines for decisions: the Office of the Comptroller of the Currency would have up to 180 days to deem an application complete and another 180 days to approve or deny it. If the comptroller fails to issue a decision within the latter window, approval would be granted automatically.

By creating a path for qualified payments companies to use a defined subset of Federal Reserve services through a tailored account model, the measure would help payment infrastructure evolve with innovation in a safe and responsible way, said Cody Carbone, chief executive officer of The Digital Chamber.

The Digital Chamber is a trade association representing blockchain and other digital asset companies.