Fed Signals Shift as Washington Targets Paper Checks

Check usage continues to decline each year as consumers and businesses shift toward digital tools. At the same time, significant numbers of users still depend on checks for convenience, record keeping or lack of better alternatives.

This uneven reliance has led the Federal Reserve to seek input about the future of its own check services. The answer will influence whether checks fade quietly or evolve with new investment and stronger protections.

The Data Tells a Split Story

PYMNTS reporting highlights why the future of checks is under scrutiny. A PYMNTS Intelligence study done in collaboration with The Clearing House found that fraud is 31 times more likely on checks than on real-time payments such as the FedNow Service and the RTP network. The study also reported that 63% of organizations experienced check fraud in 2024 while only 2% reported fraud involving real-time payments.

These numbers reflect what the Federal Reserve itself acknowledges in its Request for Information and Comment on Check Services, announced last week and published in the Federal Register this week, which describes checks as vulnerable to theft, alteration and forgery.

Pressure for modernization is also coming from federal policy. The executive order from President Donald Trump earlier this year requires agencies to end their use of paper-based disbursements and adopt digital rails, a shift that we noted in this report will cut government costs and reduce fraud exposure. The federal government spent nearly $700 million in fiscal year 2024 to maintain paper based systems for its own check processing.

What the Federal Reserve Wants to Know

The Federal Reserve’s newly published RFI signals that the future of checks is open for debate. The RFI seeks input on how checks are used, how valuable Reserve Bank services remain and which operational elements matter most. It asks the public to assess deposit deadlines, return processing, discrepancy handling and the importance of stable check infrastructure. Several paths are presented, ranging from maintaining services largely as they are, to simplifying certain operations, to reducing or eliminating check services, to investing in modernization.

The RFI says maintaining current services without investment could allow performance to degrade, while a reduction in services could restrict support for users that still depend on checks.

Bowman Argues There Is Still a Place for Checks

Not everyone at the Federal Reserve agrees with the direction implied by the RFI. Vice Chair for Supervision Michelle W. Bowman issued a public statement opposing the RFI. She argued that the RFI appears to favor discontinuation even though checks remain important. Bowman noted that about 11 billion checks were written in 2021. Although they accounted for only 5% of noncash payments, they represented roughly 21% of noncash payment value. She stated that discontinuing Federal Reserve check services is not an efficient response to rising fraud, especially given the continuing role of checks.

Who Still Uses Checks and Why

Checks remain important in specific market segments. Small businesses that rely on manual accounting systems, older consumers who value paper documentation and individuals or firms without consistent access to digital banking continue to use them. PYMNTS research shows that many businesses want to reduce their reliance on checks but have not fully transitioned. In the Treasurer’s Guide to AR Payment Optimization, PYMNTS reported that 45%  of businesses want to move away from paper checks to cut costs. Yet businesses also noted that some industries remain built around manual processes, keeping checks in circulation despite new tools.

Security Upgrades Could Shape the Future

If checks remain in use, their security must improve. The Fed’s RFI identifies fraud risk as a major concern, and Bowman highlights the need for collaborative solutions. Security technologies can reduce exposure. These include check stock with microprinting and watermarks, digital imaging systems that match issued checks with presented items and automated reconciliation tools that reduce manual handling. Image-based verification, tighter internal controls and automated accounts receivable (AR) and accounts payable (AP) workflows can reduce risk for firms that continue to accept checks.

Remote deposit capture and artificial intelligence (AI)-driven anomaly detection can also limit opportunities for tampering by reducing physical transportation of checks. These tools demonstrate that checks can be made safer even as real time payment options expand.

The Path Ahead

The Fed’s RFI is open for a 90-day comment period. The responses will determine how check services evolve, whether through modernization, simplification or contraction. Given the uneven state of checks, the outcome may be a more limited role supported by enhanced security for the users who still need them (at least for now).