The US Federal Reserve published a document on Wednesday that requested public comment on a proposal to establish a payment account for diverse financial institutions including FinTechs, allowing them to access the central bank’s payment rails for the first time.

As payments evolve, an increasingly wide array of financial institutions have approached the body seeking access to its payment services to reduce costs and increase payment speeds, the institution said. Many of these institutions are not federally insured.

According to the document, the proposed payments account is designed to “support innovation” by allowing these institutions to meet their clearing and settlement needs, while at the same time mitigating the risk to regional Reserve Banks and the payments system as a whole.

The proposed account would not allow institutions access to intraday credit or the discount window, a short-term emergency lending facility, would not earn interest on balances held at a reserve bank. Account holders would additionally only have access to payment services with automated controls to prevent overdrafts, the Federal Reserve said.

The proposal would also not expand or otherwise change legal eligibility for access to accounts or payments services from the Federal Reserve, it said.

The news comes a day after Donald Trump issued an executive order asking the Fed to review its policies on allowing FinTechs access to reserve accounts. The order says that FinTechs provide “innovative services and solutions that enhance access to financial products and services and create economic opportunity for all Americans.”

The order requires the heads of each federal financial regulator, and the organisation's board of governors, to “take steps to encourage innovation” within 180 days of its signing.

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