Key takeaways

• The Fed is evaluating whether to maintain, upgrade, or scale back its check processing services.
• Paper check usage continues to fall as electronic payments dominate.
• Government agencies like the IRS are phasing out paper checks due to fraud and operational costs.

The Federal Reserve is reviewing the future of its check processing services as consumer check use declines and infrastructure costs rise. Recent government agency shifts away from paper checks underscore a changing landscape.

First it was the penny.¹ Then came the end for many types of government-issued paper checks.² Now the Federal Reserve is considering — among other options — gradually phasing out the check processing services it provides for banks and credit unions.³

The central bank issued a request for information asking the public and industry for comment on the future of its check processing services, amid declining check use among consumers and rising infrastructure costs.⁴ Empower Research shows that 2 in 5 Americans never pay with a check.

The Federal Reserve system offers paper check clearing and collection services to financial institutions for a fee, but the infrastructure is aging while reliance on digital alternatives has grown rapidly.⁵

A June 2025 report from the Federal Reserve Bank of Atlanta found that 90% of surveyed consumers prefer electronic alternatives over paper checks for paying bills. Just 7% of consumers said they paid by check as of 2024, compared to 19% in 2020.⁶

The study found that half of all bills were paid electronically from bank accounts — up from 44% in 2020 — as more people used banking apps, websites, or direct account credentials to make payments. Another one-third of bills were paid with cards, a category that includes debit, credit, and prepaid cards.⁷

Read more: How to be smart in a digital society

Fed examines the future of check processing

Despite the decline in usage, checks still represent a significant value in non-cash payments, as much as 21% of the value of that category.⁸ Paper check payments remain common for many consumer-to-consumer payments, and for transactions between small businesses, the Fed notice said.⁹ 

But maintaining today’s level of check service would also require substantial new investments in the central bank’s check infrastructure. The Fed notice outlined a few scenarios for future check services:¹⁰

• Hold steady. A continuation of the Reserve Banks' check services largely as they exist today without investments to address aging infrastructure. The move could eventually lead to reduced reliability as aging systems continue to decline.
• Upgrade. Invest in a more modern check infrastructure to improve current services, including security, a move that could push operating costs up.
• Scale back. Reduce check services significantly, such as limiting hours of operation, or winding them down altogether. This would lower operating costs but could reduce or eventually eliminate the Fed’s role in processing checks.

Government agencies shift away from paper checks

The notice comes just months after the Social Security Administration stopped sending out most paper checks for benefits as of Sept. 30.¹¹ The IRS is phasing out paper tax refund checks for individual taxpayers, a move expected to impact 7% of taxpayers.¹²

And U.S. government payments to vendors are also going nearly all-electronic as of Sept 30. Fraud has been cited as one of the reasons for the moves, with paper checks more likely to get lost, stolen, altered, or delayed than checks sent via electronic methods.¹³

The FBI in 2025  warned about the rise in stolen checks from residential mailboxes and U.S. Postal Service collection boxes and facilities. The notice also said that bank reports of suspicious check activity have doubled in recent years.¹⁴

Fraud also has become more sophisticated in recent years with scammers exploiting bank requirements to make customer money available before fully verifying checks. Many share tips and even photos on social media message boards.¹⁵

Read more: The U.S. wants to cancel paper checks. Here’s why

What’s next for the Fed request on check services

The Fed’s request for comment doesn’t mean check processing would halt immediately or even wind down in any quick fashion.

The notice issued on Dec. 9 is a request for information with public comments due in March 2026. The Fed will use the collected information to assess possible strategies for the future of the check services, but it wouldn’t propose or proceed with any changes without more rounds of comment.¹⁶