Under the proposal, these limited-purpose accounts would provide no discount-window borrowing or intraday credit. Balances would earn no interest, and available payment services would need automated overdraft controls. The Fed said existing legal eligibility would remain unchanged. Those distinctions matter when evaluating a provider’s claims about direct access or faster settlement.
Read the Federal Reserve’s May 20 proposal announcement.
Publication note, October 23, 2026: This explainer examines the May 20 proposal. The official docket lists July 27, 2026 as the comment deadline. A closed comment period does not itself establish adoption or approval for an individual institution.
Image: Eccles Building, photographed March 29, 2011. Britt Leckman / Federal Reserve Board, public domain, via Wikimedia Commons.
Why the safeguards matter
Governor Lisa Cook supported seeking public comment while emphasizing continuing attention to institutional and systemwide risks. Governor Michael Barr dissented, arguing that the proposed protections against money laundering and terrorist financing were insufficient, particularly for institutions the Fed does not supervise. Their statements show that access and oversight must be considered together.
Sources: Cook’s statement and Barr’s statement.
Questions merchants can put to a provider
Our practical reading is that a change in settlement infrastructure becomes valuable to a small business only when the benefit reaches its account. A provider’s technical access does not, by itself, establish a merchant’s deposit schedule, price or protections.
- Which institution actually holds and transfers the business’s funds?
- When are funds available to spend, including weekends and holidays?
- What fees, reserves or contractual holds still apply?
- What happens when a payment is delayed, rejected or sent incorrectly?
- Which protections apply to the specific account and balance being offered?
Test the claim against your own funds flow
For example, a supplier payment can settle between financial institutions while a merchant balance remains subject to a provider’s reserve or release policy. Before changing providers, ask for a written diagram showing each institution, the account in which money rests, and the event that makes it available to your business. Then reconcile one completed payment from the customer instruction through the bank statement. This is an operating test, not a prediction that the proposal will reduce your fees.
AMS view
More payment competition can be useful. Merchants should assess a service through its written terms and demonstrated performance. Ask for a clear explanation of the funds flow and compare it with actual settlement reports before changing a critical payment process.
This analysis concerns the May 20 proposal. It does not establish that the proposal has become final or that any particular provider has received approval. Those facts require a separate check before making a purchasing decision.
By Eric Kuvykin. General business information, not individualized financial or legal advice.
Eric Kuvykin
Publisher and editorial director covering payments, fintech, merchant services, banking, AI, technology and operating strategy for small and medium-sized businesses.
