President Donald Trump issued an executive order that seeks to mandate a transition to electronic payments for all Federal disbursements and receipts.
The order states that the use of paper-based payments by the federal government, including checks and money orders, imposes unnecessary costs, delays, and risks of fraud, lost payments, theft, and inefficiencies.
“Historically, Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer (EFT). Maintaining the physical infrastructure and specialized technology for digitizing paper records cost the American taxpayer over $657 million in Fiscal Year 2024 alone,” the order said.
Transitioning to electronic payments will defend against financial fraud and improper payments, while increasing efficiency, reducing costs, and enhancing the security of federal payments.
Effective September 30, the Secretary of the Treasury shall cease issuing paper checks for all federal disbursements inclusive of intragovernmental payments, benefits payments, vendor payments, and tax refunds, except as specified in section 4 of this order.
“All executive departments and agencies (agencies) shall comply with this directive by transitioning to EFT methods, including direct deposit, prepaid card accounts, and other digital payment options, and take all steps necessary to enroll recipients in EFT payments,” the order said.
Also, as soon as practicable, all payments made to the Federal Government shall be processed electronically, in most cases. There are some exceptions, including cases where individuals who do not have access to banking services or electronic payment systems
The Independent Community Bankers of America (ICBA) applauded the move.
“ICBA and the nation’s community banks applaud the Trump administration for working to combat the threat of check fraud by addressing the Treasury Department’s use of paper checks,” ICBA President and CEO Rebeca Romero Rainey said. “With community bankers using their relationship-based banking model to help consumers defend against the rise in check fraud and other scams, ICBA is available to work with the Treasury Department as it transitions away from paper checks to ensure more secure payments. ICBA is currently partnering with the U.S. Postal Inspection Service to combat check fraud by offering community banks in-branch educational materials with step-by-step instructions to help consumers safeguard their financial assets.”
Further, ICBA continues to support the growth of instant payments options like the FedNow Service, which allow for efficient payments and immediate funds settlement.