Three major banking organizations have encouraged the US Treasury to abolish paper checks in favor of electronic payments for government disbursements.

Advocating Digital Payments

In a joint letter submitted as a response to the Treasury’s request for information related to the Executive Order on Modernising Payments, the Bank Policy Institute, The Clearing House Association, and the Consumer Bankers Association highlighted the need for faster adoption of digital payment methods. They cited benefits such as reduced fraud and quicker access to funds.

Addressing Check Fraud and Theft

The groups pointed out that discontinuing paper Treasury checks would help reduce instances of theft and fraud, especially considering the high volume and immediate fund availability associated with these payments. They referenced Federal Reserve data indicating that check fraud accounted for about 32% of all fraud losses in 2024. A significant portion of this fraud involved mail theft, which resulted in reported losses of approximately $688 million between February and August 2023, according to the Financial Crimes Enforcement Network (FinCEN).

Furthermore, Treasury checks are often targeted due to their predictable nature and regulatory requirement for funds to be available the day after deposit. While electronic payments offer a faster and more secure alternative, some groups, particularly older adults, prefer paper checks. A study cited by the organizations found that the likelihood of preferring paper checks increases by about 0.5% with each additional year of age.

Steps to Support the Transition

To aid in achieving the goals set out in the Executive Order, the banking associations suggested several measures for Treasury consideration:

• Launching a national education campaign to inform recipients about the benefits of digital payments.
• Expanding the use of existing payment platforms such as The Clearing House’s EPN network and Early Warning Services’ Zelle-based disbursement tools.
• Investing in fraud prevention technologies, including identity verification systems.
• Restricting exceptions that allow the continued use of checks and working with financial institutions to identify altered or counterfeit items.
• Analysing payment data to better understand why some recipients continue to rely on paper checks.