Government Check Elimination: Will SMBs Follow?
- The U.S. government plans to eliminate paper checks in federal payments
- Small businesses face a challenge
- Local merchants, contractors,& independent service providers rely on checks
PYMNTS takes a look at the U.S. government's move to eliminate paper checks in federal payments, which is accelerating digital payment adoption for the government while creating ripple effects for small businesses toward what they believe is a faster, safer, and more efficient economy.
But, how much has really changed? As noted in the article:
“The vast majority of government payments already are done via electronic methods,” said Reed Luhtanen, CEO and executive director of the U.S. Faster Payments Council (FPC) in an interview with PYMNTS in the wake of last week’s deadline.
This, of course, puts the long-standing role of checks in the spotlight. It’s a financial fixture whose influence is rapidly waning, yet whose impact lingers for millions of small businesses.
Historically, paper checks served as the backbone of government disbursements. They've been trusted not just for payroll and vendor payments, but for their tangible record-keeping and perceived security. However, as PYMNTS reports, recent government mandates are accelerating the phase-out of checks, aiming to modernize fund flows for agencies, contractors, and citizens. This seismic shift is about more than just speed; it’s a calculated move to cut costs and combat fraud, as check fraud remains a persistent risk for businesses of all sizes.
Will SMBs Follow?
For small businesses, the ripple effect is especially profound. The government transition drives a powerful “follow-on” effect. As agencies sunset paper payments, businesses and individuals alike are exposed to the convenience, speed, and transparency of instant digital payments. This exposure sparks a natural progression: The more they use digital payment methods, the more businesses—and their customers—recognize their advantages.
But, is that really enough to push SMBs to fully adopt electronic payments?
Many local merchants, contractors, and independent service providers in the U.S. continue to rely on checks for a host of reasons: familiarity, the lack of digital infrastructure, and certain customer preferences.
In order for widespread adoption, the path forward requires operational readiness—not just new standards and guidelines, but real solutions that enable both sending and receiving digital payments efficiently and securely. If one side wants to use digital payments but the other is unwilling to accept that payment channel, then the fallback will continue to be checks. This is one of the main reasons 91% of business still use paper checks.
It's too early to determine if SMBs will adopt electronic payments over their favored check payments. For financial institutions, it's crucial to continue enabling and maintaining their customers' preferred method of payment -- including checks.