Federal Reserve Opens Door to Main Street’s Post-Check Payments Future

The so-called “modern” paper check has been around for centuries. Before the United States ever gained its independence, the Bank of England in 1717 was using pre-printed forms.

Fast forward over 300 years, and checks still play a meaningful, even outsized, role in U.S. commerce, particularly for medium-sized businesses. But as comments on a request for information and comment on the Future of the Federal Reserve Banks’ Check Services revealed, American businesses might be declaring their independence from the paper check sooner than expected.

Rather than signaling an abrupt end to checks, the Fed’s request framed a more nuanced reality. The infrastructure that supports about half of the nation’s check processing is aging, volumes are declining unevenly and maintaining service quality will require thoughtful investment.

At the same time, the Fed said businesses are the “primary users of checks” and that they “may experience additional costs and barriers to adopting electronic payments, including the need to modernize their treasury practices, accounting processes and infrastructures for accepting and disbursing payments.”

Checks are not going away overnight, the document underscored, but the status quo is no longer guaranteed. In many ways, the Fed’s initiative has legitimized conversations that treasury and accounting teams have been trying to advance internally for years. Payment modernization often struggles to compete with more visible initiatives, from ERP upgrades to cybersecurity investments.

By highlighting the risk of service degradation if infrastructure is not modernized, the Fed is giving payment transformation a concrete business rationale rooted in continuity, reliability and long-term cost management.

Read also: Fed Signals Shift as Washington Targets Paper Checks

Why Checks Persist and What That Reveals

The responses to the Fed’s request confirm what many already knew. Checks persist in the middle-market not because of nostalgia, but because they solve real problems. They are universally accepted, deeply embedded in vendor relationships, and tightly integrated into existing accounting workflows.

The lesson for payment modernization may not be to replace checks wholesale, but to offer electronic alternatives that clearly outperform them on the dimensions that matter most, including visibility, reliability, ease of use and cost.

The Association for Financial Professionals found that 73% of organizations are moving their B2B payments from paper checks to electronic payments, and 92% of them said the primary reason was increased efficiency.

“[W]e support modernizing Federal Reserve check services in a way that aligns with declining volumes, provided changes are phased, predictable, and do not create unintended access or operational challenges, particularly for smaller institutions that continue to serve members who rely on checks in limited but important circumstances,” wrote Yolo Federal Credit Union in a comment on the Fed’s request, one of 218 made to-date.

For digital-native professionals and those younger business owners and leaders who are becoming a majority across the Main Street economy, waiting 30 days for an invoice to clear via check is increasingly unacceptable. This 21st-century cohort expects modern payment capabilities like real-time processing, automated reconciliation and seamless integrations with their ERP systems.

Modernization as an Operational Upgrade

Still, not everyone at the Federal Reserve agrees with the direction implied by the request. Vice Chair for Supervision Michelle W. Bowman issued a public statement opposing it. She said the request appears to favor discontinuation even though checks remain important.

That point of view was echoed by the National Federation of Independent Business, which wrote in its own comment: “When the free market ceases at some point in the future to make significant use of checks, then and only then should the FRS consider leaving the entirety of check clearing services to whatever private sector entities still provide those services at that time. But, with reserve banks processing 3 billion checks in 2024, the market clearly continues to make significant use of checks and continues to find having FRS checking services beneficial. The day may come when the FRS can stop doing check-clearing work (assuming the law allows the FRS to stop), but that day is not today, and that day is clearly a long way off.”

The U.S. government is not alone in its modernization efforts across the global stage. The Monetary Authority of Singapore, for example, has been working to reduce check usage for years and announced in 2023 a timeline for phasing checks out completely. In July, The Association of Banks in Singapore debuted an ePayments tool to help businesses transition from paper checks.

Findings in ”Reality Check: Fact vs. Fiction in Real-Time Payments Fraud,” the August Real-Time Payments Tracker® Series report from PYMNTS Intelligence and The Clearing House, revealed that 63% of firms reported check fraud in 2024.

According to separate PYMNTS Intelligence data, nearly 1 in 4 SMBs fell victim to check fraud last year. Unlike large corporations with dedicated fraud teams, SMBs waste hours chasing down fraudulent transactions. That’s time that could be spent growing their businesses.

As for what firms warily eying the phase-out of the paper check can do?

“Automate, automate, automate,” Lorenzo Soriano de Teresa, senior vice president, merchant services, at American Express, told PYMNTS in an interview in August 2024. “The right automation solution, or the right partner, can help businesses move past their current payments concerns to see tangible benefits.”

For the mid-market, the message is neither alarmist nor abstract. Checks are not disappearing tomorrow, but the conditions that have allowed them to persist unchanged are eroding. Modernization is no longer a matter of innovation theater; it is becoming a matter of operational resilience.

In that sense, the Fed’s request did exactly what it was meant to do. It surfaced trade-offs, exposed dependencies and invited users to confront the true cost of standing still. The companies that respond thoughtfully, grounded in their own realities rather than abstract ideals, may be best positioned for whatever comes after the check.

For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.