The Payments System Behind Your Dinner Tab is Ready for an Upgrade

Angelena Bradfield is the Head of Policy at the Financial Technology Association, where she leads the organization’s policy development and regulatory engagement efforts. Previously, she held senior policy roles at various bank trade associations and began her career at the White House.

It all appears seamless — paying for your Uber to the restaurant, splitting the check via an app, or using your phone to purchase ice cream after dinner. Yet, the infrastructure behind these transactions is often complex, with multiple entities involved before your payments settle.

The United States stands at an inflection point where technology has only just begun to revolutionize how we conduct our lives, including our financial lives. Modernizing legal frameworks and legacy technologies must continue if we want to make a safer, more seamless future a reality — and maximize the benefits for American consumers and small businesses. To do this, we need to expand access to Federal Reserve services for payment-focused firms and enhance the infrastructure that supports payments.

Modernizing Fed Access

The Fed’s payment account prototype proposal, aka the “skinny Master Account,” is a good start. It is meant to solve for the lack of approvals of payments-focused firms following the agency’s finalization of its tiered Master Account Access Guidelines. More specifically, only one Tier 3 firm has been able to obtain an account (with that applicant having unique circumstances), and many Tier 2 and Tier 3 applications remain pending. In addition to the business uncertainty a lack of approval can cause, if the Tier 2 or 3 institution lacks direct access it must work with a bank with such access, which adds complexity, can slow down payment clearing and settlement timeframes, and increases costs for businesses and consumers. 

The Fed’s payment account can be a step towards addressing this issue by providing a narrow path to payment settlement and clearing. But only if the Fed makes additional revisions to enhance its utility — notably by including FedACH services, which it originally proposed excluding. Given the role that the ACH network plays in today’s payments ecosystem — responsible for 35.19 billion payments in 2025 — it is essential that FedACH be an integral component of all Fed account options. While the Fed cites credit risk management as a key driver of the payment account’s initial parameters, such concerns can be addressed through more tailored risk mitigation measures (e.g., collateralization and risk requirements, interest charges, etc.) and the Fed’s ongoing monitoring. 

Separately, in order to ensure a level playing field, any payment account should preserve an eligible entity’s ability to apply and receive active consideration for a full Fed Master Account. Should the Fed ultimately adopt such an approach, it could diversify how eligible institutions engage with its payments infrastructure while adhering to the access granted to depository institutions under the Federal Reserve Act.

Enhancing Payment Infrastructure

Master and payment accounts alone will not deliver a modern payments system. The infrastructure itself needs to expand to account for enhanced use cases, technological developments, and emerging threats. 

It has been almost a decade since The Clearing House (TCH) launched its Real Time Payments (RTP) network, with FedNow following only a few years ago. Volume on both systems has grown, but there is still work to be done to make them interoperable. The framework leveraged today to govern the connection between the Fed and TCH ACH networks has existed for decades, and the utility of those interoperable rails is clear. Real-time payments deserve the same increased utility. 

Established rails can also be expanded to offer enhanced features and options. For example, the Fed should integrate its Payee Name Verification tool into FedNow to further mitigate fraud risks. As institutions continue to explore tokenization, new frameworks and connections will likely need to be stood up to ensure seamless settlement. 

Additionally, any payment infrastructure enhancements should address current and projected use cases. While time and resourcing will dictate priorities, it is important not to lose sight of potential solutions to one of the more confounding payments issues of our day — the inherent delays and opacity in cross-border transactions. 

When I recently sent a wire abroad, the bank warned me that it would take at least a month to settle — thankfully, I had time to wait. New payment solutions have emerged that cut through some transaction delays, but our ultimate reliance on established networks means we’re no closer to solving fundamental cross-border payment issues. Bilateral network agreements, tokenization, and other technologies can help address some of the impediments to comprehensive, faster global payments, but we’re currently still in the development phase.

Expanding Access to Fed Services

Ultimately, achieving a modern payments system requires more than adjustments to account access and infrastructure — it demands a holistic rethinking of who has access to Fed clearing and settlement services — and how. Other countries — including the U.K., EU, and Canada — have deliberately opened their payment systems to well-regulated payments-focused firms, and the results have included greater competition, lower costs, and faster innovation. 

The U.S. risks falling behind if it does not make comparable upgrades to its own infrastructure and regulatory model. Congress should enact a clear statutory pathway to Fed access for well-regulated payment firms — establishing defined eligibility criteria, appropriate prudential safeguards, and a transparent application process — grounding such access in a durable legal framework that can support the next generation of payments.

The changes outlined above — payment rail infrastructure, fraud protections, and Fed account access — ultimately ensure that the seamlessness consumers already experience on the surface corresponds to an equally modern underlying infrastructure. Together, this will mean that your next dinner outing ends with faster, cheaper transactions processed through an open, competitive infrastructure built for our increasingly digital lives.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

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