US Treasury urged to hit ground running in ending paper cheques

Three banking groups have written to the US Department of the Treasury this week urging “prompt action” in ditching paper cheques for government disbursements in favour of electronic payments.
The Bank Policy Institute, Clearing House Association and Consumer Bankers Association jointly sent a 10-page letter to Tyler Curtis, director of the Office of Consumer Policy in the Treasury, emphasising “the importance of eliminating paper cheques from government disbursements to reduce risk and ensure all recipients benefit from faster, more reliable payment delivery”.
Their move follows US president Donald Trump’s executive order, signed in March, mandating that, with effect from 30 September 2025, the federal government “will cease issuing paper cheques for all disbursements, including intragovernmental payments, benefits, vendor payments and tax refunds”. Trump signed the order – titled ‘Modernizing Payments To And From America’s Bank Account’ – to force a switch from “old-fashioned paper-based payments to fast, secure electronic payments” across the federal public service.
The letter submitted by the three banking groups on 30 June came in response to a request for information (RFI) related to the order published by the Treasury on 30 May. This RFI gave 30 days for “interested individuals and organisations to provide feedback on Treasury’s implementation of the executive order and make recommendations to increase public awareness to help consumers, including unbanked and underbanked populations, transition to digital payments”.
The executive order is described in the letter as “mark[ing] a pivotal step forward in public-private collaboration to deliver faster, more secure, and modern payment solutions to American individuals and businesses for payments to or from the federal government”.
Read more: Trump orders end of US government cheques in digital disbursements overhaul
Five recommendations
The letter begins by noting that cheque fraud “remains a challenge, with criminals continuing to exploit this legacy payment system”, noting a statistic that cheque fraud accounted for 32% of all fraud losses in 2024.
The bulk of the text is focused on setting out five recommendations to “achieve the payment modernisation goals” of the executive order.
The recommendations are to: use government data to implement targeted paper cheque-reduction strategies; create a targeted public awareness campaign to encourage use of electronic payments; expand government use of existing secure electronic payment platforms; enhance fraud controls for electronic payments made by the Treasury; continuously monitor and strengthen fraud prevention for all electronic payment methods used by Treasury as cheque usage declines; and provide controls for remaining Treasury cheques issued.
In respect of the first recommendation, the groups note that “cheque usage to send payments continues to be prevalent in commercial contexts because long-standing business practices are slow to change”.
In respect of the second recommendation, the groups state that “tailored outreach, including through trustworthy community channels and educational resources in multiple languages, will be essential to ensuring diverse communities understand the benefits and security of electronic payments”. They suggest such a campaign highlights three “critical” themes: that reducing cheque usage “will reduce fraud against consumers”; that electronic payments are “faster and more secure”; and that “support is available to ease the transition to electronic payments”.
On the fifth recommendation, the groups suggest that “it is important that Treasury establish narrowly tailored standards for a person or entity to qualify for an exception in order to meaningfully reduce reliance on cheques”; and add, as a final point, that “to help reduce the vulnerability of Treasury cheques to mail theft, Treasury should consider removing the agency’s name from the back of the mailing and ensure the cheque is not visible in the envelope window”.
Examples to examine
The letter contains various examples of ongoing or past initiatives that could be useful.
“To the extent that continued use of paper cheques for government payments is the result of people being unbanked or underbanked, Treasury should collaborate with the Federal Deposit Insurance Corporation in its #GetBanked initiative to help individuals open no- or low-cost bank accounts compatible with electronic payments,” the banking groups state.
“Another possible avenue to address unbanked populations is collaboration with the Cities for Financial Empowerment (CFE) Fund’s “Bank On” programme, the goal of which is to ensure that everyone has access to a safe, affordable bank or credit union account,” their letter continues.
Launched in 2012, the CFE Fund provides funding and technical assistance to mayoral offices to help households with “low and moderate” incomes. “The associations [signing the letter] have long supported this programme and its ability to increase financial inclusion and expand access to transaction accounts,” the letter states.
Treasury should also look to successful examples of government intervention to encourage bank account openings and electronic payments, the banking groups propose.
“One such example is the playbook used by the Internal Revenue Service (IRS) in 2020 during the COVID-19 pandemic,” they state. “Through this effort, the IRS effectively facilitated consumers’ online enrolment for Bank On accounts through an IRS portal to streamline the process for stimulus payments. By May 2023, the IRS reported that more than 70 million people used the portal to provide new bank or credit union account information and receive their stimulus payment or earned income tax credit by direct deposit rather than by physical cheque.”
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Payment ‘in’ also e-volving
Trump’s order demanded that executive departments and agencies transition to modern, electronic funds transfer (EFT) methods such as direct deposit, debit/credit card payments, digital wallets and real-time transfers.
Payments made to the federal government, such as fees, fines, loans and taxes must also be processed electronically “where permissible under existing law”. The Treasury Department will “phase out” physical lockbox services and expedite electronic collection of federal receipts. Lockboxes are secure bank-run mailing locations.
The order stated that a “comprehensive public awareness campaign” would be launched to inform federal payment recipients of the shift to electronic options and “offer guidance” on setting up digital payments.
A second executive order, titled ‘Protecting America’s Bank Account Against Fraud, Waste and Abuse’, was signed by president Trump on the same day (25 March) as the payments modernisation order. This order included an intention to reduce “as appropriate” Non-Treasury Disbursing Offices (NTDOs), with the Treasury Department asked to develop a plan to centralise and manage payments.
“President Trump is cracking down on waste, fraud, and abuse in government by modernising outdated paper-based payment systems that impose unnecessary costs, delays, and security risks,” a fact sheet published by the White House alongside the payments modernisation order stated. “Paper-based payments, such as cheques and money orders, impose unnecessary costs, delays, and risks of fraud, lost payments, theft, and inefficiencies.”
It highlighted that, historically, Treasury cheques are 16 times more likely to be reported lost or stolen, returned undeliverable or altered than an electronic funds transfer; and that mail theft complaints have increased “substantially” since 2020.
Banks issued about 680,000 reports of cheque fraud in 2022 – “nearly double the number from 2021”. Digital payments are “more efficient, less costly and less vulnerable to fraud,” it stated.
The executive order itself stated that agencies would coordinate with the Treasury to facilitate a smooth transition to digital payments, ensuring that affected individuals and entities receive adequate support. The Treasury secretary “shall work with financial institutions, consumer groups, and other stakeholders to address financial access for unbanked and underbanked populations”.
More than 96% of payments made by the federal government were electronic during the fiscal year 2023, according to the Bureau of the Fiscal Service.
Trajectory towards e-payments
The Fiscal Service, which is an office of the Treasury, announced in November last year that it had selected Bank of New York Mellon (BNY) to manage its ‘Direct Express’ programme for federal benefits.
Direct Express serves about 3.4 million Americans – most of whom lack a bank account – with a prepaid debit card to receive monthly federal benefits.
“Around 95% of Supplemental Security Income payments are now disbursed electronically, compared to just 53% when the programme began in 2008,” the Fiscal Service said.
BNY was handed a five-year contract after a competitive selection process, according to an announcement. The New York City-headquartered bank is taking over the assignment from Texas-headquartered bank Comerica, which has supported the programme since 2008.
“BNY’s expansive suite of features and customer service options will enable an evolution in the Direct Express programme by providing enhanced efficiency and services tailored to the programme’s customer base,” the Fiscal Service said. “Customers will enjoy rent and other bill payment solutions, virtual cards, cardless ATM access, chat and text customer service, online dispute filing, in-person identity authentication options, and more.”
This article was intitally published on Global Government Forum’s sister title Global Government Fintech