Paper Checks Are Dead – Feds Make It Official

The federal government is officially saying goodbye to paper checks, shifting all disbursements to electronic payments to enhance efficiency, reduce fraud, and cut costs, while Affirm secures a major BNPL deal with Chase.

Welcome to Today in Payments, I’m your host, Patti Murphy, here with your daily dose of payments notes.

Feds Say Goodbye to Checks

For decades, the federal government has been working to eliminate the need for issuing and processing paper checks. Now, with the stroke of a pen, President Donald Trump has made this a reality.

The President just signed an Executive Order mandating that the federal government stop issuing checks for all disbursements, effective September. The order applies to tax payments and refunds, benefits, and vendor payments, among other transactions.

All executive departments and agencies must transition to modern electronic funds transfer (EFT) methods, such as direct deposit, debit/credit card payments, digital wallets, and real-time transfers. Payments made to the federal government—such as fees, fines, loans, and taxes—must also be processed electronically where legally permissible.

The move is being applauded by banking trade groups, including the American Bankers Association.

As part of the initiative, the U.S. Treasury will phase out physical lockbox services, which expedite the acceptance and processing of checks.

Exceptions to the Executive Order:

Some exceptions will be made for:

• Individuals without banking or electronic payment access—about 3% of the population

• Certain emergency payments

• Specific law enforcement activities

Why the Shift to Digital Payments?

The rationale behind the move is clear:

• Paper-based payments (checks and money orders) impose unnecessary costs, delays, and risks, including fraud, lost payments, and theft.

• Mail theft complaints have increased substantially since 2020.

• Treasury checks are 16 times more likely to be lost, stolen, or returned undeliverable than electronic payments.

• Cost savings: Maintaining the infrastructure and specialized technology for digitizing paper records cost American taxpayers over $657 million in FY 2024.

• Check fraud is surging, with banks reporting 680,000 cases in 2022.

• Digital payments are more efficient, less costly, and less vulnerable to fraud.

This marks a significant shift. While the federal government has long encouraged electronic payments—such as promoting direct deposit for Social Security since the 1980s—many Americans still prefer checks. However, with this Executive Order, the federal government is making it clear: paper checks are being phased out, and digital payments are the future.

Affirm Strikes BNPL Deal with Chase

It didn’t take long for Affirm, the buy now, pay later (BNPL) firm, to bounce back after being dropped by Walmart. The company just announced a major partnership with JPMorgan Chase’s payment network.

Just weeks ago, Walmart replaced Affirm with its BNPL rival, Klarna. But now, Affirm has secured a deal with Chase, one of the largest merchant networks in the country, putting Affirm in front of millions of consumers at checkout.

BNPL Usage Is on the Rise

• At least 30% of U.S. adults use BNPL, according to Javelin Strategy & Research.

• Affirm claims 40 million shoppers use its platform.

• Affirm reports that merchants using its BNPL solution see a 70% increase in average order value and 30% fewer abandoned carts than with other BNPL providers.

With this new Chase deal, Affirm is positioning itself for major growth in the competitive BNPL market.

That’s all for Today in Payments. Keep coming back every weekday for your daily dose of payments news.