The U.S. Department of the Treasury has accelerated its push to eliminate paper‑check disbursements, and industry participants across payments, banking and retail need to be ready.
Executive Order 14247, signed March 25 2025, mandates that, to the extent permitted by law, all federal disbursements and receipts be converted to electronic methods by September 30 2025.
What’s New
- The Internal Revenue Service (IRS) confirmed on September 23 that individual tax‑refund paper checks will be phased out beginning September 30 2025.
- The Treasury recently published a dedicated resources page to help recipients transition to digital payments—including guidance for those without bank accounts or reliable internet access.
- According to industry data, approximately 93‑94% of individual taxpayers already receive refunds electronically, leaving roughly 6‑7% (≈ 6–10 million people) still reliant on paper checks.
Why It Matters to Industry
- Payment processors & fintechs: With the federal government shifting large volumes of payments to digital rails (direct deposit, prepaid cards, real‑time payments, digital wallets), service providers must ensure platforms support scalability, security and alternative payment types for underserved recipients.
- Banks & credit unions: Institutions will play a key role in onboarding individuals who still receive checks, offering direct‑deposit setup, prepaid card alternatives or digital‑wallet delivery. This presents both opportunity and risk (fraud, identity verification).
- Retailers and vendors: As government payments become digital‑first, vendors and suppliers servicing federal agencies should evaluate how their payment acceptance and settlement flows accommodate digital disbursements and how that impacts cash‑flow and vendor management.
- Technology & operations leads: Legacy check‑processing systems are being phased out—agencies will rely on real‑time payment rails and wallet‑based delivery. Businesses supporting B2B payments must ensure readiness for digital settlement and alignment with emerging standards.
Key Industry Risks & Considerations
- Unbanked/under‑banked populations: Industry must support the transition for individuals lacking banking access; failure to do so could lead to payment delays, exceptions and reputational risk.
- Implementation timeline concerns: Although the target date was September 30, 2025, experts caution full transition may be phased and that guidance on exceptions is still pending.
- Fraud and digital‑payment risk: While paper checks are 16 × more likely to be lost, stolen or altered than EFTs, the transition amplifies digital fraud vectors (phishing, account takeover) and thus demands upgraded controls.
