Federal Reserve Access for Fintechs: Lawmakers Debate the PACE Act

On Wednesday, lawmakers clashed over whether fintech companies should gain entry to the Federal Reserve payment system through the proposed Payments Access and Consumer Efficiency (PACE) Act.

At a House Financial Services Committee hearing, supporters said the measure could help small businesses and consumers if nonbank fintech firms received broader use of government payment rails.

Backers argued that transactions would move faster and more smoothly, including on weekends and holidays. They also said direct access could reduce settlement delays and fees, cut reliance on partner banks to clear and settle payments, and make funds availability more predictable for merchants. Witnesses, including an executive from Stripe, endorsed the proposal.

Currently, many nonbank fintechs must secure separate state authorizations to offer payment services in multiple jurisdictions.

The bill would establish an Office of the Comptroller of the Currency registration for payment service providers open to nonbanks. Once registered, firms could request account access to the Federal Reserve’s Fedwire Funds Service, the FedNow Service, and FedACH Services if the legislation becomes law. The Federal Reserve operates and oversees these core services as part of its role in keeping the national payment system safe, efficient, and widely accessible, while supervising participating institutions to ensure they can manage risk and comply with rules. Direct access today is largely limited to banks and credit unions, and even when access is considered, it can come with conditions that limit an account’s use to payment-settlement activities and restrict features such as overdrafts or intraday credit.

Stripe Vice Chair Eileen O’Mara told the panel that enacting the PACE Act would provide a clear framework to work with small businesses and bolster confidence in how funds move.

She added that today’s fragmented, state-based regime leaves many small merchants unsure when funds will clear and be available for services they have already delivered.

The session, titled “The Future of Payments: Promoting Innovation and Fair Markets,” was led by Representative French Hill, a Republican from Arkansas.

Even so, several members warned that letting less-regulated companies into the payment system could introduce new risks for the financial system. Supporters countered that clearer eligibility rules could broaden competition and improve resilience, while opponents said expanded access could heighten exposure to fraud, money laundering, and sanctions evasion, increase operational and cybersecurity risk, and create regulatory arbitrage if firms obtain payment-system privileges without bank-like supervision.

Direct access can improve speed and transparency in settlement, but it works best when oversight and accountability are as clear as the technology.

Payments Bill Arrived This Year

Introduced in April by California Representatives Young Kim (Republican) and Sam Liccardo (Democrat), the proposal drew support from fintech and crypto firms’ trade groups, including the Financial Technology Association, Blockchain Association, The Digital Chamber, and the Crypto Council for Innovation. Silicon Valley hosts many fintech upstarts, among them Stripe, which maintains headquarters in South San Francisco and Dublin. Supporters also pointed to how shifts in agency guidance and enforcement priorities, as well as executive-branch directives that push agencies to promote competition or reassess digital-asset risks, can change eligibility expectations and the operational, compliance, and reporting burden for firms seeking payment-system access.

Kim and other advocates contended that the U.S. risks falling behind peers that have already opened their national payment networks to fintech providers.

Kim said it is hard to fathom that the U.S. is the only G7 nation without a faster payments framework and warned that failing to act would disadvantage working families and small enterprises.

The measure sets eligibility standards and defines activities for registrants.

• Advance competition and innovation.
• Make services broadly available to the public.
• Operate nationwide.
• Hold money transmitter licenses in at least 40 states.

In practice, applicants would also be expected to demonstrate strong governance, risk-management and operational controls, and the ability to meet anti-money-laundering, sanctions-screening, and consumer-protection obligations, along with any ongoing examination or reporting requirements tied to registration and account access.

Threats to Consumers

Representative Bill Foster of Illinois supported the goal of improved payments but cautioned against allowing fintechs to achieve dominance akin to China’s WeChat and Alipay.

“These platforms can pressure both producers and consumers because they control market data that traditional banks do not,” Foster said, adding that without guardrails, market forces could hand excessive power to such super apps.

He and other Democrats also argued that consumer protections weakened after the Trump administration curtailed the Consumer Financial Protection Bureau.

Foster further predicted that the rise of agentic commerce will generally benefit payments but create major regulatory challenges, chiefly due to the speed at which transactions will occur.

Bank Group Points to Risks

Last year, Federal Reserve officials floated a limited “skinny” account to widen access to central bank payment services. The concept was a restricted, payment-focused account intended to support settlement through specific Fed services while limiting other capabilities associated with a traditional master account. Compared with broader master-account access, a payment account would be designed to narrow what activities are permitted, potentially constrain balances or transaction types, and avoid features that could amplify risk, such as certain forms of credit or other central-bank privileges. The central bank later proposed restricting that option to banks and credit unions, despite interest from fintech firms seeking direct access.

Banks have pushed back on the idea, a stance reiterated at the hearing by the Bank Policy Institute. Paige Paridon, BPI’s co-head of regulatory affairs, said the industry already delivers extensive payment services under rules designed to ensure safety and soundness.

“Banks support innovation and welcome competition when it is based on products and services, not on avoiding regulation and supervision,” Paridon said.

She noted that some limited-purpose and novel charters at the federal and state levels may not require adherence to the same federal safeguards most national banks follow.

Paridon argued that some firms pursue novel charters primarily to obtain a Federal Reserve master account and access to Fed payment services, and that such access can pose significant risks to individual Reserve Banks, the U.S. payment system and its participants, and financial stability. In weighing access requests, the Federal Reserve generally considers legal eligibility and whether an applicant can manage compliance and operational risk, including payment-system integrity, controls against illicit finance, and the broader public benefits and potential spillovers for the payment system.