The U.S. Treasury Department Publishes Resources Page for Transition to Digital Payments
- U.S. Treasury Department has officially "eliminated" paper check disbursements -- with many exceptions
- New resources page published by the U.S. Treasury to assist in transition
- How will this impact inancial institutions?
As many are aware, as of September 30, 2025 the US Government has officially ended distributing paper check disbursements.
According to the NTA Blog, "During the 2025 filing season, about 94% of individual taxpayers provided their direct deposit information on their Form 1040." This leaves 6% -- about 10M individuals -- of the US population who will need to transition to direct deposit.
However, Congress notes there are exceptions that will still receive paper checks, including:
- Unbanked Households
- Americans Living Abroad
- Taxpayers With Religious Constraints
- Victims of Domestic Violence
- Individuals With Disabilities
In response, The U.S. Treasury Department introduced a new resource page to assist individuals in the transition.
Source: www.mymoney.gov/federalpayments
The new Treasury resource page not only educates recipients about the phaseout, but also offers support in shifting to electronic payments. As we noted, paper checks will still be available in specific cases. However, the transition towards digitization enables banks and government agencies to leverage stronger authentication, real-time monitoring, and better tracking of suspicious activity—all crucial in the fight against fraud.
Understanding the Challenges
We've noted some of the exceptions, and it's worth diving deeper into the possible disadvantages and challenges that come with the transition:
- Digital Divide: Many Americans -- especially older adults, low-income individuals, or those in rural areas -- may have limited access to digital financial services or reliable internet. They might struggle to transition to electronic payments or lack the resources and support to do so.
- Banking Access Barriers: Individuals without a bank account or those who rely on alternative financial services may face delays or complications receiving federal payments electronically, since direct deposit generally requires a bank account.
- Fraud Concerns Shift: While paper check fraud may decrease, electronic payments have their own risks—such as phishing, account takeover, and identity theft. As payments move online, fraudsters may adapt their strategies to exploit digital vulnerabilities.
- System Outages & Cybersecurity Risks: Electronic payment systems can be susceptible to technical glitches, outages, or cyberattacks, potentially delaying payments or exposing personal data.
- Learning Curve: Some recipients may have difficulties navigating setup (like enrolling for direct deposit) or resolving errors due to unfamiliarity with digital platforms and processes.
- Limited Options for Special Circumstances: Although paper checks will still be available in limited cases, the phaseout may make it harder for people with unique payment needs (e.g., joint account disbursements) to obtain checks when truly needed.
Impact for Financial Institutions
For the banking industry, elimination of US Treasury check disbursements represents very limited impact. According to Federal Reserve data, 36 million government checks were processed by the FED in 2024. While not by any means a small amount, in the scope of the estimated 10B+ checks written in the US each year it is a tiny drop in the bucket. And, all banks will still be required to accept U.S. Treasury checks since there will still be individuals receiving them.
In our recent article on the topic of businesses following in the government's footsteps, we noted that the government transition drives a powerful “follow-on” effect. To enable 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.
Meanwhile, 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 -- one of the main reasons 91% of business still use paper checks.
With all this in mind, financial institutions will see minimal effect from this transition, which means checks are here to stay for the foreseeable future.