The federal government’s move to eliminate paper checks by Sept. 30 signals a massive shift toward digital transactions, potentially saving the Treasury $750 million. This transition, driven by an executive order, could accelerate the adoption of real-time payments across government and business. PYMNTS breaks it down.
Federal Government’s Move Away From Paper Checks:
- A presidential executive order has set a Sept. 30 deadline for the federal government to stop issuing paper checks for disbursements.
- The order also mandates the government to cease accepting checks for payments like fees, fines, loans and taxes, though without a set deadline.
- This aims to transition to electronic payment methods such as direct deposit, debit/credit cards, digital wallets and real-time transfers.
Financial Impact and Efficiency:
- The Department of Government Efficiency (DOGE) estimates the Treasury Department could save $750 million by eliminating paper checks and associated lockbox maintenance.
Current Check Usage:
- Federal Reserve research indicates that businesses and the government are the primary users of paper checks.
- In 2015, these entities accounted for 60% of all paper checks by volume.
- The Fed also reports that the U.S. government processed 36 million paper checks in 2024, with an average value of $4,861.
Business and Consumer Preferences:
- Businesses are increasingly seeking faster, more flexible payment methods.
- A significant majority (81%) of businesses believe instant payments are crucial for supplier relationships, according to PYMNTS Intelligence data.
- Over half (54%) of payees are willing to pay a fee for instant vendor transaction payments.
- Consumers are showing an increasing appetite for instant payments, with a growing percentage of disbursements being received instantly or via same-day ACH.
Federal Government Disbursement Volumes:
- Significant federal disbursements occur through various agencies, with substantial sums potentially moving to digital payment rails.
- Examples on USASpending.gov include Treasury refunding internal revenue collections ($333 billion), Social Security benefits ($1.31 trillion) and Health and Human Services Medicaid grants ($689 billion).
Progress and Existing Electronic Payment Usage:
- Nacha reports that the Treasury originated 1.86 billion ACH payments in 2024, moving $8.5 trillion.
- Many federal agencies already heavily utilize electronic payments:
- 99% of Social Security benefits are paid electronically.
- 97% of tax refunds are issued electronically.
- 97% of Veterans benefits are paid electronically.
- 100% of the federal government employee payroll is electronic.
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