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Processing

Five Years of Direct Federal Reserve Processing: How We Built It

Processing

Five Years of Direct Federal Reserve Processing: How We Built It

Processing

Five Years of Direct Federal Reserve Processing: How We Built It

Processing

Five Years of Direct Federal Reserve Processing: How We Built It

Jason Kruse
, 
Chief Technology Officer
December 2, 2025
 • 
#
 min read

When we launched Lithic's FedLine Direct connection in the spring of 2020, we were acutely aware of the milestone we were setting in our pursuit to build the foundation for a new generation of payment infrastructure. This integration was greater than a feature enhancement to our existing processing stack; it represented the culmination of years of investment in our team, platform, and vision for Lithic’s infrastructure growth. 

Today, we're celebrating a major milestone: five years of FedLine Direct processing and over 50 million individual transactions processed directly through our FedLine Direct endpoints. But the real story isn't just about the numbers. It's about why we built this infrastructure in the first place and what it means for the future of fintech and payments innovation.

In my last article, I discussed how we intentionally designed Lithic’s core issuer processing infrastructure to eliminate legacy tech debt and third-party dependencies. We explored how Lithic maintains direct connections from our data centers to international payment card networks and the Federal Reserve to enable platform reliability, control, and uptime, but didn’t investigate in detail what this last point of Direct-to-Fed connectivity means. As one of six companies that provide both FedLine Direct and card network issuer processing, Lithic is uniquely situated to support ambitious, innovative companies in bringing compelling payments and banking products to market.

The Challenge With Legacy Systems

The product evolution and design ethos behind Lithic’s issuer processing platform is grounded in our founding sister brand, Privacy, a consumer-facing virtual card product that reimagined the way people spend online. For cardholders, every transaction processed on a Privacy card appeared as a seamless ACH transaction in their banking app and statements; the reality of how our team designed funds flows on traditional bank cores behind the scenes to support real-time, secure, locked payments was more complex. Privacy processed millions of ACH debit originations tied to distinct card transactions for the holistic payment loop, and the experience working through legacy bank cores was frustrating, to say the least. 

Legacy core banking systems, used by thousands of banks across America, have long been the only interface to the Federal Reserve’s payments systems. But these systems lacked the accuracy, reliability, and performance that we needed – we experienced reporting delays and inconsistent data reconciliation pipelines due to the lack of real-time webhooks and clunky ACH or wire processing. The middleware layers between us and the Federal Reserve’s clearing house and real-time gross settlement systems created too many additional points of failure. We realized that if we wanted to build truly modern payment experiences, we couldn't rely on technology built several decades ago. We needed to go directly to the source.

What Fedline Direct Actually Means

In the same way that Lithic has built and owns multiple single-provider, private fiber circuits connecting us physically to payment networks like Visa, Mastercard, and Amex, Fedline Direct means that Lithic maintains direct connections to the Federal Reserve for ACH, Wire, and FedNow processing. Instead of routing through multiple intermediaries and legacy bank cores, we connect straight to the Federal Reserve's payment systems.

The Federal Reserve lists 21 companies as FedLine Direct Service Providers, a select group that includes major players like FIS and Fiserv. This core payment infrastructure bridges our clients’ programs and customers to the Federal Reserve for immediate and to-the-penny accurate settlement and reconciliation, with zero dependency on legacy systems.

How It Works

A regulated FI or bank completes a routing number application with LexisNexis, the official registrar of ABA routing numbers, and delegates Lithic as the certified Federal Reserve service provider.

Lithic then exchanges NACHA files for ACH transactions and ISO 20022 messages for FedWire and FedNow transactions with the Federal Reserve. Lithic acts as the parallel banking core and maintains the system of record within this secondary ABA routing number (sometimes called a “sidecar core” or “payments hub”).

The beauty of this set up is threefold:

  • The integration work for the bank is exceptionally easy, by delegating much of the work to Lithic while still utilizing the familiar Fed risk and oversight tools (e.g., FedACH Risk Origination Monitoring Service).
  • The bank, through Lithic, can offer compelling and modern digital banking, payment processing, and embedded finance products to reach larger audiences and meet their business KPIs, whether that’s aggregating more deposits or generating more payments fee revenue without concern for limitations of their rigid, legacy banking core.
  • With Lithic as the Federal Reserve service provider operating a sidecar core, the bank’s existing retail operations are unaffected and fire-walled.

Why This Matters for Our Clients

Reliability at scale. We've processed over 50 million ACH entries through our FedLine Direct infrastructure over the past five years. Our platform also captures and validates incoming ACH credits in near real-time, providing immediate transaction visibility and dramatically reducing settlement risk.

Speed to market. We've built and maintained the Direct-to-Fed infrastructure so our clients don't need to. We've completed the Federal Reserve certification process, deployed specialized hardware, and built the protocol integrations.

Innovation velocity. Our direct-to-metal access and control of the ledgering layer enables us to integrate Fed-native innovations as they’re released. Working directly with ISO 20022’s structured message format, we can access detailed transaction data and create accounts and sub-accounts dynamically to support any customer use case or funds flow structure, from complex multi-party settlement to custom FBO configurations.

Transparency and control. Our clients get full visibility into money movement at every level. Our dashboard and APIs provide real-time ACH transaction tracking, settlement monitoring, and granular ledger data. Our automated reconciliation runs at nearly 100% accuracy with settlement accounts zeroing out at the end of each day.

Looking Forward

Five years in, our FedLine Direct infrastructure has become a foundational differentiating advantage for innovative financial technology companies seeking to build game-changing payments products. The advantage is not simply to provide access to faster and cheaper ACH processing, but to power it in such a way that our clients have direct control and programmability over one of the most critical components of their banking tech stack.

As we continue to expand our platform capabilities, this foundation enables us to move faster, build more sophisticated products, and deliver better experiences for our clients and their end-users.

Financial experiences are only as good as the infrastructure that powers them. That's why we built our own. Lithic is one of fewer than two dozen companies globally maintaining direct connections to major card networks like Visa, Mastercard, American Express, and the Federal Reserve. We process billions of dollars in monthly card spend and tens of millions of individual ACH, FedWire, and FedNow transactions, all with an unshakeable 99.99%+ uptime. And that's why we'll continue investing in making our payment infrastructure the most reliable, flexible, and developer-friendly platform in the industry.

Ready to see what modern payment infrastructure can do? Take our Sandbox for a spin at docs.lithic.com, or if you want to talk shop about core architecture over coffee, let’s chat!

Table of Contents

Jason Kruse
, 
Chief Technology Officer
December 2, 2025
 • 
#
 min read

When we launched Lithic's FedLine Direct connection in the spring of 2020, we were acutely aware of the milestone we were setting in our pursuit to build the foundation for a new generation of payment infrastructure. This integration was greater than a feature enhancement to our existing processing stack; it represented the culmination of years of investment in our team, platform, and vision for Lithic’s infrastructure growth. 

Today, we're celebrating a major milestone: five years of FedLine Direct processing and over 50 million individual transactions processed directly through our FedLine Direct endpoints. But the real story isn't just about the numbers. It's about why we built this infrastructure in the first place and what it means for the future of fintech and payments innovation.

In my last article, I discussed how we intentionally designed Lithic’s core issuer processing infrastructure to eliminate legacy tech debt and third-party dependencies. We explored how Lithic maintains direct connections from our data centers to international payment card networks and the Federal Reserve to enable platform reliability, control, and uptime, but didn’t investigate in detail what this last point of Direct-to-Fed connectivity means. As one of six companies that provide both FedLine Direct and card network issuer processing, Lithic is uniquely situated to support ambitious, innovative companies in bringing compelling payments and banking products to market.

The Challenge With Legacy Systems

The product evolution and design ethos behind Lithic’s issuer processing platform is grounded in our founding sister brand, Privacy, a consumer-facing virtual card product that reimagined the way people spend online. For cardholders, every transaction processed on a Privacy card appeared as a seamless ACH transaction in their banking app and statements; the reality of how our team designed funds flows on traditional bank cores behind the scenes to support real-time, secure, locked payments was more complex. Privacy processed millions of ACH debit originations tied to distinct card transactions for the holistic payment loop, and the experience working through legacy bank cores was frustrating, to say the least. 

Legacy core banking systems, used by thousands of banks across America, have long been the only interface to the Federal Reserve’s payments systems. But these systems lacked the accuracy, reliability, and performance that we needed – we experienced reporting delays and inconsistent data reconciliation pipelines due to the lack of real-time webhooks and clunky ACH or wire processing. The middleware layers between us and the Federal Reserve’s clearing house and real-time gross settlement systems created too many additional points of failure. We realized that if we wanted to build truly modern payment experiences, we couldn't rely on technology built several decades ago. We needed to go directly to the source.

What Fedline Direct Actually Means

In the same way that Lithic has built and owns multiple single-provider, private fiber circuits connecting us physically to payment networks like Visa, Mastercard, and Amex, Fedline Direct means that Lithic maintains direct connections to the Federal Reserve for ACH, Wire, and FedNow processing. Instead of routing through multiple intermediaries and legacy bank cores, we connect straight to the Federal Reserve's payment systems.

The Federal Reserve lists 21 companies as FedLine Direct Service Providers, a select group that includes major players like FIS and Fiserv. This core payment infrastructure bridges our clients’ programs and customers to the Federal Reserve for immediate and to-the-penny accurate settlement and reconciliation, with zero dependency on legacy systems.

How It Works

A regulated FI or bank completes a routing number application with LexisNexis, the official registrar of ABA routing numbers, and delegates Lithic as the certified Federal Reserve service provider.

Lithic then exchanges NACHA files for ACH transactions and ISO 20022 messages for FedWire and FedNow transactions with the Federal Reserve. Lithic acts as the parallel banking core and maintains the system of record within this secondary ABA routing number (sometimes called a “sidecar core” or “payments hub”).

The beauty of this set up is threefold:

  • The integration work for the bank is exceptionally easy, by delegating much of the work to Lithic while still utilizing the familiar Fed risk and oversight tools (e.g., FedACH Risk Origination Monitoring Service).
  • The bank, through Lithic, can offer compelling and modern digital banking, payment processing, and embedded finance products to reach larger audiences and meet their business KPIs, whether that’s aggregating more deposits or generating more payments fee revenue without concern for limitations of their rigid, legacy banking core.
  • With Lithic as the Federal Reserve service provider operating a sidecar core, the bank’s existing retail operations are unaffected and fire-walled.

Why This Matters for Our Clients

Reliability at scale. We've processed over 50 million ACH entries through our FedLine Direct infrastructure over the past five years. Our platform also captures and validates incoming ACH credits in near real-time, providing immediate transaction visibility and dramatically reducing settlement risk.

Speed to market. We've built and maintained the Direct-to-Fed infrastructure so our clients don't need to. We've completed the Federal Reserve certification process, deployed specialized hardware, and built the protocol integrations.

Innovation velocity. Our direct-to-metal access and control of the ledgering layer enables us to integrate Fed-native innovations as they’re released. Working directly with ISO 20022’s structured message format, we can access detailed transaction data and create accounts and sub-accounts dynamically to support any customer use case or funds flow structure, from complex multi-party settlement to custom FBO configurations.

Transparency and control. Our clients get full visibility into money movement at every level. Our dashboard and APIs provide real-time ACH transaction tracking, settlement monitoring, and granular ledger data. Our automated reconciliation runs at nearly 100% accuracy with settlement accounts zeroing out at the end of each day.

Looking Forward

Five years in, our FedLine Direct infrastructure has become a foundational differentiating advantage for innovative financial technology companies seeking to build game-changing payments products. The advantage is not simply to provide access to faster and cheaper ACH processing, but to power it in such a way that our clients have direct control and programmability over one of the most critical components of their banking tech stack.

As we continue to expand our platform capabilities, this foundation enables us to move faster, build more sophisticated products, and deliver better experiences for our clients and their end-users.

Financial experiences are only as good as the infrastructure that powers them. That's why we built our own. Lithic is one of fewer than two dozen companies globally maintaining direct connections to major card networks like Visa, Mastercard, American Express, and the Federal Reserve. We process billions of dollars in monthly card spend and tens of millions of individual ACH, FedWire, and FedNow transactions, all with an unshakeable 99.99%+ uptime. And that's why we'll continue investing in making our payment infrastructure the most reliable, flexible, and developer-friendly platform in the industry.

Ready to see what modern payment infrastructure can do? Take our Sandbox for a spin at docs.lithic.com, or if you want to talk shop about core architecture over coffee, let’s chat!

December 2, 2025

When we launched Lithic's FedLine Direct connection in the spring of 2020, we were acutely aware of the milestone we were setting in our pursuit to build the foundation for a new generation of payment infrastructure. This integration was greater than a feature enhancement to our existing processing stack; it represented the culmination of years of investment in our team, platform, and vision for Lithic’s infrastructure growth. 

Today, we're celebrating a major milestone: five years of FedLine Direct processing and over 50 million individual transactions processed directly through our FedLine Direct endpoints. But the real story isn't just about the numbers. It's about why we built this infrastructure in the first place and what it means for the future of fintech and payments innovation.

In my last article, I discussed how we intentionally designed Lithic’s core issuer processing infrastructure to eliminate legacy tech debt and third-party dependencies. We explored how Lithic maintains direct connections from our data centers to international payment card networks and the Federal Reserve to enable platform reliability, control, and uptime, but didn’t investigate in detail what this last point of Direct-to-Fed connectivity means. As one of six companies that provide both FedLine Direct and card network issuer processing, Lithic is uniquely situated to support ambitious, innovative companies in bringing compelling payments and banking products to market.

The Challenge With Legacy Systems

The product evolution and design ethos behind Lithic’s issuer processing platform is grounded in our founding sister brand, Privacy, a consumer-facing virtual card product that reimagined the way people spend online. For cardholders, every transaction processed on a Privacy card appeared as a seamless ACH transaction in their banking app and statements; the reality of how our team designed funds flows on traditional bank cores behind the scenes to support real-time, secure, locked payments was more complex. Privacy processed millions of ACH debit originations tied to distinct card transactions for the holistic payment loop, and the experience working through legacy bank cores was frustrating, to say the least. 

Legacy core banking systems, used by thousands of banks across America, have long been the only interface to the Federal Reserve’s payments systems. But these systems lacked the accuracy, reliability, and performance that we needed – we experienced reporting delays and inconsistent data reconciliation pipelines due to the lack of real-time webhooks and clunky ACH or wire processing. The middleware layers between us and the Federal Reserve’s clearing house and real-time gross settlement systems created too many additional points of failure. We realized that if we wanted to build truly modern payment experiences, we couldn't rely on technology built several decades ago. We needed to go directly to the source.

What Fedline Direct Actually Means

In the same way that Lithic has built and owns multiple single-provider, private fiber circuits connecting us physically to payment networks like Visa, Mastercard, and Amex, Fedline Direct means that Lithic maintains direct connections to the Federal Reserve for ACH, Wire, and FedNow processing. Instead of routing through multiple intermediaries and legacy bank cores, we connect straight to the Federal Reserve's payment systems.

The Federal Reserve lists 21 companies as FedLine Direct Service Providers, a select group that includes major players like FIS and Fiserv. This core payment infrastructure bridges our clients’ programs and customers to the Federal Reserve for immediate and to-the-penny accurate settlement and reconciliation, with zero dependency on legacy systems.

How It Works

A regulated FI or bank completes a routing number application with LexisNexis, the official registrar of ABA routing numbers, and delegates Lithic as the certified Federal Reserve service provider.

Lithic then exchanges NACHA files for ACH transactions and ISO 20022 messages for FedWire and FedNow transactions with the Federal Reserve. Lithic acts as the parallel banking core and maintains the system of record within this secondary ABA routing number (sometimes called a “sidecar core” or “payments hub”).

The beauty of this set up is threefold:

  • The integration work for the bank is exceptionally easy, by delegating much of the work to Lithic while still utilizing the familiar Fed risk and oversight tools (e.g., FedACH Risk Origination Monitoring Service).
  • The bank, through Lithic, can offer compelling and modern digital banking, payment processing, and embedded finance products to reach larger audiences and meet their business KPIs, whether that’s aggregating more deposits or generating more payments fee revenue without concern for limitations of their rigid, legacy banking core.
  • With Lithic as the Federal Reserve service provider operating a sidecar core, the bank’s existing retail operations are unaffected and fire-walled.

Why This Matters for Our Clients

Reliability at scale. We've processed over 50 million ACH entries through our FedLine Direct infrastructure over the past five years. Our platform also captures and validates incoming ACH credits in near real-time, providing immediate transaction visibility and dramatically reducing settlement risk.

Speed to market. We've built and maintained the Direct-to-Fed infrastructure so our clients don't need to. We've completed the Federal Reserve certification process, deployed specialized hardware, and built the protocol integrations.

Innovation velocity. Our direct-to-metal access and control of the ledgering layer enables us to integrate Fed-native innovations as they’re released. Working directly with ISO 20022’s structured message format, we can access detailed transaction data and create accounts and sub-accounts dynamically to support any customer use case or funds flow structure, from complex multi-party settlement to custom FBO configurations.

Transparency and control. Our clients get full visibility into money movement at every level. Our dashboard and APIs provide real-time ACH transaction tracking, settlement monitoring, and granular ledger data. Our automated reconciliation runs at nearly 100% accuracy with settlement accounts zeroing out at the end of each day.

Looking Forward

Five years in, our FedLine Direct infrastructure has become a foundational differentiating advantage for innovative financial technology companies seeking to build game-changing payments products. The advantage is not simply to provide access to faster and cheaper ACH processing, but to power it in such a way that our clients have direct control and programmability over one of the most critical components of their banking tech stack.

As we continue to expand our platform capabilities, this foundation enables us to move faster, build more sophisticated products, and deliver better experiences for our clients and their end-users.

Financial experiences are only as good as the infrastructure that powers them. That's why we built our own. Lithic is one of fewer than two dozen companies globally maintaining direct connections to major card networks like Visa, Mastercard, American Express, and the Federal Reserve. We process billions of dollars in monthly card spend and tens of millions of individual ACH, FedWire, and FedNow transactions, all with an unshakeable 99.99%+ uptime. And that's why we'll continue investing in making our payment infrastructure the most reliable, flexible, and developer-friendly platform in the industry.

Ready to see what modern payment infrastructure can do? Take our Sandbox for a spin at docs.lithic.com, or if you want to talk shop about core architecture over coffee, let’s chat!

Transcript
December 2, 2025

When we launched Lithic's FedLine Direct connection in the spring of 2020, we were acutely aware of the milestone we were setting in our pursuit to build the foundation for a new generation of payment infrastructure. This integration was greater than a feature enhancement to our existing processing stack; it represented the culmination of years of investment in our team, platform, and vision for Lithic’s infrastructure growth. 

Today, we're celebrating a major milestone: five years of FedLine Direct processing and over 50 million individual transactions processed directly through our FedLine Direct endpoints. But the real story isn't just about the numbers. It's about why we built this infrastructure in the first place and what it means for the future of fintech and payments innovation.

In my last article, I discussed how we intentionally designed Lithic’s core issuer processing infrastructure to eliminate legacy tech debt and third-party dependencies. We explored how Lithic maintains direct connections from our data centers to international payment card networks and the Federal Reserve to enable platform reliability, control, and uptime, but didn’t investigate in detail what this last point of Direct-to-Fed connectivity means. As one of six companies that provide both FedLine Direct and card network issuer processing, Lithic is uniquely situated to support ambitious, innovative companies in bringing compelling payments and banking products to market.

The Challenge With Legacy Systems

The product evolution and design ethos behind Lithic’s issuer processing platform is grounded in our founding sister brand, Privacy, a consumer-facing virtual card product that reimagined the way people spend online. For cardholders, every transaction processed on a Privacy card appeared as a seamless ACH transaction in their banking app and statements; the reality of how our team designed funds flows on traditional bank cores behind the scenes to support real-time, secure, locked payments was more complex. Privacy processed millions of ACH debit originations tied to distinct card transactions for the holistic payment loop, and the experience working through legacy bank cores was frustrating, to say the least. 

Legacy core banking systems, used by thousands of banks across America, have long been the only interface to the Federal Reserve’s payments systems. But these systems lacked the accuracy, reliability, and performance that we needed – we experienced reporting delays and inconsistent data reconciliation pipelines due to the lack of real-time webhooks and clunky ACH or wire processing. The middleware layers between us and the Federal Reserve’s clearing house and real-time gross settlement systems created too many additional points of failure. We realized that if we wanted to build truly modern payment experiences, we couldn't rely on technology built several decades ago. We needed to go directly to the source.

What Fedline Direct Actually Means

In the same way that Lithic has built and owns multiple single-provider, private fiber circuits connecting us physically to payment networks like Visa, Mastercard, and Amex, Fedline Direct means that Lithic maintains direct connections to the Federal Reserve for ACH, Wire, and FedNow processing. Instead of routing through multiple intermediaries and legacy bank cores, we connect straight to the Federal Reserve's payment systems.

The Federal Reserve lists 21 companies as FedLine Direct Service Providers, a select group that includes major players like FIS and Fiserv. This core payment infrastructure bridges our clients’ programs and customers to the Federal Reserve for immediate and to-the-penny accurate settlement and reconciliation, with zero dependency on legacy systems.

How It Works

A regulated FI or bank completes a routing number application with LexisNexis, the official registrar of ABA routing numbers, and delegates Lithic as the certified Federal Reserve service provider.

Lithic then exchanges NACHA files for ACH transactions and ISO 20022 messages for FedWire and FedNow transactions with the Federal Reserve. Lithic acts as the parallel banking core and maintains the system of record within this secondary ABA routing number (sometimes called a “sidecar core” or “payments hub”).

The beauty of this set up is threefold:

  • The integration work for the bank is exceptionally easy, by delegating much of the work to Lithic while still utilizing the familiar Fed risk and oversight tools (e.g., FedACH Risk Origination Monitoring Service).
  • The bank, through Lithic, can offer compelling and modern digital banking, payment processing, and embedded finance products to reach larger audiences and meet their business KPIs, whether that’s aggregating more deposits or generating more payments fee revenue without concern for limitations of their rigid, legacy banking core.
  • With Lithic as the Federal Reserve service provider operating a sidecar core, the bank’s existing retail operations are unaffected and fire-walled.

Why This Matters for Our Clients

Reliability at scale. We've processed over 50 million ACH entries through our FedLine Direct infrastructure over the past five years. Our platform also captures and validates incoming ACH credits in near real-time, providing immediate transaction visibility and dramatically reducing settlement risk.

Speed to market. We've built and maintained the Direct-to-Fed infrastructure so our clients don't need to. We've completed the Federal Reserve certification process, deployed specialized hardware, and built the protocol integrations.

Innovation velocity. Our direct-to-metal access and control of the ledgering layer enables us to integrate Fed-native innovations as they’re released. Working directly with ISO 20022’s structured message format, we can access detailed transaction data and create accounts and sub-accounts dynamically to support any customer use case or funds flow structure, from complex multi-party settlement to custom FBO configurations.

Transparency and control. Our clients get full visibility into money movement at every level. Our dashboard and APIs provide real-time ACH transaction tracking, settlement monitoring, and granular ledger data. Our automated reconciliation runs at nearly 100% accuracy with settlement accounts zeroing out at the end of each day.

Looking Forward

Five years in, our FedLine Direct infrastructure has become a foundational differentiating advantage for innovative financial technology companies seeking to build game-changing payments products. The advantage is not simply to provide access to faster and cheaper ACH processing, but to power it in such a way that our clients have direct control and programmability over one of the most critical components of their banking tech stack.

As we continue to expand our platform capabilities, this foundation enables us to move faster, build more sophisticated products, and deliver better experiences for our clients and their end-users.

Financial experiences are only as good as the infrastructure that powers them. That's why we built our own. Lithic is one of fewer than two dozen companies globally maintaining direct connections to major card networks like Visa, Mastercard, American Express, and the Federal Reserve. We process billions of dollars in monthly card spend and tens of millions of individual ACH, FedWire, and FedNow transactions, all with an unshakeable 99.99%+ uptime. And that's why we'll continue investing in making our payment infrastructure the most reliable, flexible, and developer-friendly platform in the industry.

Ready to see what modern payment infrastructure can do? Take our Sandbox for a spin at docs.lithic.com, or if you want to talk shop about core architecture over coffee, let’s chat!

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