Three major banking trade groups have urged the US Treasury to eliminate paper checks in favour of electronic payments for government disbursements.
In a joint letter submitted in response to a Treasury request for information tied to the Executive Order on Modernising Payments, the Bank Policy Institute, The Clearing House Association, and the Consumer Bankers Association called for faster adoption of digital payment methods, citing fraud prevention and faster access to funds as key benefits.
The groups argued that discontinuing the use of paper Treasury checks would help reduce instances of theft and fraud, particularly given the high volume and immediate fund availability associated with these payments. They also pointed to other benefits, such as improving efficiency and securing disbursements to recipients.
Check fraud and theft highlight the urgency
According to the Federal Reserve, check fraud accounted for approximately 32% of all fraud losses in 2024. Much of this fraud stemmed from mail theft, which led to USD 688 million in reported losses between February and August 2023, based on data from the Financial Crimes Enforcement Network (FinCEN).
Treasury checks are frequently targeted due to their predictability and the regulatory requirement that funds typically be made available the day after deposit. While electronic payments offer a faster and more secure alternative, some segments of the population, particularly older adults, still express a preference for checks. One study cited by the groups found that the likelihood of preferring paper checks increases by about 0.5% with each additional year of age.
Recommendations to support the transition
To help meet the goals outlined in the Executive Order, the banking associations proposed several steps for Treasury to consider, including:
- 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 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.
