The Federal Reserve is asking the public to weigh in on the future of its check-processing operations, signaling that significant cutbacks may be on the table as the use of paper checks in the United States continues to decline.
Why It Matters
The Federal Reserve Board last week opened a 90-day comment period to help it determine how much check processing support banks and credit unions still need. Reserve banks currently collect and process checks for financial institutions in exchange for a fee, but the central bank says maintaining those services at current levels would require major investment in aging infrastructure.
According to the Federal Reserve Bank of Atlanta, checks have rapidly lost ground as a payment method. In 2020, about 19 percent of household bills were paid by check; by 2024, that figure had fallen to just 7 percent.
What To Know
“Over time, check use has steadily declined, digital payment methods have grown in availability and use, and check fraud has risen,” the Fed said in a statement. With that shift, officials are unsure whether upgrading the system is justified, prompting the new call for public input.
In its notice, the Fed outlined a range of possible changes, including “significantly reducing check services, or alternatively, substantially winding them down.” To help determine which direction to take, the Board said it is seeking feedback to “help the Board understand stakeholder needs and balance tradeoffs.”
The move to gather public opinion was approved in a six-to-one vote. The sole dissent came from Michelle Bowman, the Fed’s vice chair for supervision. Bowman warned that the request for public comment itself seemed to hint at an outcome she could not support.
“I cannot support the Request for Information and Comment on the Future of the Federal Reserve Banks’ Check Services,” Bowman said. “The Check Services RFI seems to favor the discontinuation of check services by reserve banks, even while checks remain an important payment mechanism.”
Federal Shift Away From Paper Checks
The Fed’s review comes after the federal government stopped using paper checks earlier this year. As of September 30, the Social Security Administration no longer mails paper benefits, shifting to electronic payments. That change was mandated under an executive order signed by President Donald Trump in March.
White House officials have pointed to widespread mail theft and rising fraud involving paper checks during the COVID-19 pandemic. Treasury checks, the White House said, “are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer.”
What Happens Next
The comment period is open for 90 days after publication in the Federal Register.