:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-21596936141-62661bfa670b4de8ba53fa5a7526eed0.jpg "A homeowner sorts through the rising monthly bills, June 26, 2024 in borough of Brooklyn, New York City, New York.")
Andrew Lichtenstein/Corbis via Getty Sculptures
Key Takeaways
- President Donald Trump has signed an executive order aimed at switching the federal government off paper verifies.
- The executive order could help prod the rest of the U.S. payment system to follow the governments lead.
- Consumers and works still use checks for specialty payments, and that may not change easily, experts said.
The federal government has long after to stop using paper checks and, with its latest push, could encourage others to eradicate the form of payment.
President Donald Trump has tinkled on the federal government to abandon paper and fully switch to direct deposits, card payments, and other digital methods. It’s already sundry of the way there, with 99% of Social Security beneficiaries and 97% of veterans receiving payments via direct deposits. But consummate the job has been tricky in the past, as illustrated in a partially failed effort to stop government check payments by 1999.
“We have been demanding to kill the check for 30 years, and we, as an industry, have really just not been successful in doing that,” said Peter Tapling, a specialist and veteran payments industry executive.
However, this executive order could prod the entire U.S. payment plan closer to a paperless future.
Why Is This Happening Now?
The government’s switchover is expected to take place on Sept. 30 and settle upon allow some exceptions for those without banking or electronic payment access
The good news is that “a lot of the infrastructure is already in in the right” to make the switch, said Scott Anchin, a payments expert at the Independent Community Bankers of America, a trade platoon that represents smaller banks. And consumers have gotten far more accustomed to digital payment methods.
“People are proper more and more accepting of technology,” he said. “They understand the speed, safety and efficiency benefits from electronic payments.”
The gold days of checks are clearly over. Checks were used in just $11.2 billion in transactions in 2021, down from a extreme of $49.5 billion in 1995, according to a Washington Post analysis of Federal Reserve data.
Despite fewer people using investigates, fraud has risen sharply since the pandemic. Fraudsters steal checks in the mail at alarming rates and sell them in experimental markets. Banks reported some 680,000 potential check fraud cases in 2022, up from 350,000 in 2021, according to the Cache Department’s Financial Crimes Enforcement Network.
Removing checks from the federal government will eliminate a “valuable vector of check fraud,” Anchin said. But its leadership should also help accelerate the “societal shift away from treatise instruments” and to electronic ones, he said.
Who Still Uses Checks?
For individuals, checks are still popular for big-ticket things like payments to contractors or doctors, as well as down payments or gifts. Many businesses use checks often, too, and a investigation from the Association for Financial Professionals found few signs of a major shift ahead.
Even though 65% of respondents reported realized or attempted check fraud in their organizations, 70% of those who use checks said they weren’t planning on stopping up.
There are also some features of checks that the industry has “not recreated in digital payments,” said Tapling, the payments physician. For example, some businesses use checks with multiple signatures for larger amounts. Insurers also often use multi-party log in investigates to manage accident claims.
“It’s indoctrinated into the way some businesses do work,” Tapling said.
However, Tapling revealed the federal government’s shift can have ripple effects, as agencies are major buyers of private services. And, even granting some citizens may resist the government’s shift to digital, he also noted that newer generations are completely unversed in with checks or bank branches.
“We’re going to have to change habits,” Tapling said. “But we’re also going to age out of that second nature.”