Banking groups call for accelerated transition to digital rails and enhanced fraud safeguards as paper cheque remain a key vulnerability
The US Treasury is facing renewed calls from leading financial associations to fast-track the modernisation of its payment systems, amid mounting concerns over fraud linked to government-issued paper cheques.
In a joint response to the Treasury’s recent Request for Information (RFI), published on June 30, the Bank Policy Institute, The Clearing House Association and the Consumer Bankers Association highlighted the urgent need to reduce reliance on legacy payment methods.
They warned that in 2024, cheque fraud accounted for a staggering 32% of all fraud losses, with Treasury cheques a particular target for criminals due to their distinctive packaging and rapid funds availability.
The submission, made in response to the Executive Order on “Modernising Payments to and from America’s Bank Account,” outlines a multi-pronged approach to tackling fraud and bringing federal payments into alignment with modern consumer behaviour and banking infrastructure.
Electronic platforms take centre stage
The associations recommend the Treasury expand its use of existing secure electronic payment platforms, including real-time payment systems operated by banks. These include the Clearing House’s RTP network, Zelle and ACH-based systems.
By leveraging existing rails, the government could improve security, lower costs and better serve recipients who are already engaging with these platforms in the private sector.
For payment service providers (PSPs), fintechs and banks, the recommendation signals growing policy alignment with digital payments as the default standard, creating an imperative to ensure compatibility, speed and security in the services they offer to government partners.
Fraud controls under scrutiny
Alongside the shift to electronic rails, the joint response calls for continuous monitoring and strengthening of fraud controls, especially as cheque usage declines.
One notable proposal is the development of a Treasury Cheque Verification System (TCVS) equivalent for ACH payments, allowing institutions to validate payment data in real time. Payment technology firms may find opportunities here to support the Treasury’s evolving fraud detection infrastructure.
The response also stresses the importance of targeted public awareness campaigns to encourage electronic payment adoption, particularly among unbanked or underbanked populations. The associations suggest partnerships with existing initiatives such as the FDIC’s #GetBanked and the Bank On programme, both of which promote access to low-cost, basic banking services.
Industry stakeholders are likely to play a role in facilitating onboarding, education and technical integration for these demographics. For providers focused on financial inclusion and user-friendly payment experiences, this presents a chance to partner directly with public-sector efforts.
Paper cheques face tighter controls
While the submission stops short of calling for the complete elimination of Treasury-issued cheques, it recommends limiting their use to narrowly defined exceptions.
For the remaining cheques in circulation, it proposes enhancements to physical security, shortened return windows, and improved fraud monitoring through expanded TCVS usage.
The paper notes that certain populations, such as older adults and rural residents, may still rely on cheques due to limited internet access or longstanding habits. Nonetheless, it emphasises that education and targeted support can help accelerate the transition.
A consistent theme throughout the response is the call for the Treasury to use its own data to better understand and address persistent cheque usage. By making this data publicly available, the government could enable banks, fintechs and consumer advocates to develop more targeted solutions and policy responses.
