Key insight: Federal Reserve Vice Chair for Supervision Michelle Bowman warned that the move tilts toward ending check services, even as she says checks remain an important payment option for many.
Supporting data: Checks represented 5% of noncash payments by volume in 2021.
Forward look: Following public comment, a potential phase-out plan could be in the offing that could reshape the federal payments system.
The Federal Reserve Board put out a request for public input on the future of the check services provided by the Reserve Banks, a move that comes as the administration has begun to phase out paper checks, citing long-term decline in check usage, access to digital payment methods, and the prevalence of check fraud.
The Board noted that maintaining current operations would require "substantial investments" in check infrastructure, and it outlined several potential strategic paths: holding operating costs steady but accepting reduced reliability over time; making major investments to sustain or improve service levels; or potentially substantially scale back or wind down check services to reduce costs.
"The Reserve Banks' check-processing infrastructure is aging and will soon require material investments…that, as required by law, the Reserve Banks would need to recover over the long run through service fees," the RFI stated. "Given the magnitude of potential investments, declining volumes, and trends in the check market more broadly, the Board believes that the time is appropriate to analyze a range of possible strategies for the future of the Reserve Banks' check services."
The request asks commenters to describe how the reduction in check services would affect consumers, businesses and financial companies. This inquiry is preliminary and the Board says it plans to seek further public comment if it decides to pursue a strategy with major implications for the payments system. The board will take comments for 90 days after the request's publication in the Federal Register.
The move comes after President Donald Trump signed an executive order to stop the federal government from issuing paper checks as payment, transitioning all agencies to digital methods of transferring funds. Banking groups welcomed the move at the time, citing its potential to reduce check fraud. Under the order all disbursements — including payments across agencies, government benefits, payments to vendors and tax refunds — are moving to digital. Where permissible by law, all payments to the government by citizens — such as fees, fines, taxes and loan payments — must also be paid electronically. The Treasury Department in May
Vice Chair for Supervision Michelle W. Bowman opposed issuing the request, arguing that it implicitly leans toward ending Federal Reserve check services despite the payment method's continued relevance. Bowman also expressed doubt that winding down Federal Reserve participation would help address fraud, saying the move "is not an efficient solution," to growing payments fraud, which regulators are
"The Check Services RFI seems to favor the discontinuation of check services by Reserve Banks, even while checks remain an important payment mechanism," Bowman said. "The materials note that in 2021, about 11 billion checks were written, and while they accounted for approximately 5% of the overall noncash payments, they represented about 21% of noncash payments value. Checks remain important payment mechanisms for consumers and businesses."
Adam J. Levitin, the Carmack Waterhouse Professor of Law and Finance at Georgetown Law School, has noted following the order that paper checks are also a low volume of Treasury payments. In 2024, the department issued 36 million paper checks — only 3% of the total number of payments.
Most payments made to the federal government are tax payments. Levitin said the executive order would, however, increase the cost of paying taxes for some.
"Right now, if you want to pay your taxes by check, it's free,"
