NEWS: Last week, President Trump signed an executive order calling on the federal government to phase out the use of paper checks and switch to electronic payments by Sept. 30, 2025, with some limited exceptions – such as for people without access to banking services or for emergency payments.
That gives the U.S. Treasury about six months to phase out paper checks for various purposes, including tax refunds and Social Security payments. All government departments and agencies will have to disburse funds via electronic funds transfer (EFT) methods, like direct deposit, debit/credit card payments, digital wallets, and real-time transfers.
Payments made to the federal government, like taxes, fees, fines, or loans, will also have to be made electronically, with limited exceptions.
A fact sheet that accompanied the executive order has more details. It explains that the move is meant to “modernize how the government handles money, switching from old-fashioned paper-based payments to fast, secure electronic payments.”
The administration has promised “A comprehensive public awareness campaign will be launched to inform Federal payment recipients of the shift to electronic options and offer guidance on setting up digital payments.”
Solutions and hurdles
The change is designed to cut government costs and deter check fraud. According to the White House, “Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer.” In addition, “Check fraud is becoming more common, with banks issuing about 680,000 reports of check fraud in 2022 – nearly double the number from 2021.”
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) reported in September that mail theft-related check fraud totaled more than $688 million between February 2023 and August 2023.
Still, the change will face significant operational hurdles. According to a recent article from pymnts.com, which covers e-commerce and online payments, the Internal Revenue Service (IRS) is one of many federal agencies working with outdated frameworks that rely on physical addresses rather than digital identifiers. The IRS collects taxpayer information, but not comprehensive, up-to-date details that would enable a broad suite of electronic payment choices.
Traditionally, the Treasury has either mailed out paper checks or processed direct deposits via Automated Clearing House (ACH) files – both of which rely on data the IRS gathers through tax returns. While some taxpayers opt to enter routing and account numbers for direct deposit, many of them continue to receive treasury checks by mail. “And if the government aims to eliminate checks entirely, it must update everything from how it collects consumer information to how it verifies recipients’ identities.”