Federal Reserve Governor Christopher Waller today proposed the creation of a “skinny” master account for payment services that would be easier to obtain than a regular master account but would come without the latter’s “bells and whistles.”
Speaking at a Fed conference on payments innovation, Waller said his proposed “payment account” would provide basic Fed payment services to legally eligible institutions that conduct payment services primarily through a third-party bank that has a full-fledged master account. Such accounts are lower risk and therefore would have a streamlined approval process, he said.
“Payments innovation moves fast, and the Federal Reserve needs to keep up,” Waller said.
Payment accounts would provide access to the Fed payment rails while controlling for various risks to the central bank and payment system, Waller said. Fed banks would not pay interest on balances in a payment account, and balance caps may be imposed. The accounts would not have daylight overdraft privileges — if the balance hits zero, payments will be rejected. And they would not be eligible for Fed discount window borrowing or have access to all payment services for which the Fed banks cannot control the risk of daylight overdrafts.
“I want to be clear that this is just a prototype idea to provide some clarity on how things could change,” Waller said. “The upshot is that, in my view, 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.”
