What’s Next: The Federal Government Eliminated Paper Checks

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Uncle Sam has ditched the paper checks. As of September 30, 2025, the federal government stopped issuing paper checks for most federal payments.

Using paper-based payments imposes unnecessary costs and delays, as well as increased fraud risks, lost payments, thefts and other inefficiencies. “Historicalvly, Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer (EFT),” according to the Executive Order issued by the White House.

Even though 93% of tax refunds are now delivered by direct deposit, the Internal Revenue Service (IRS) still mailed about 6.5 million paper checks in 2025. The transition to electronic payments won’t just affect federal government agencies and government vendors. Independent software vendors (ISVs) serving government agencies may need to expand their digital payment capabilities. And shifting payer expectations will likely impact most billers in the public and private sectors.

Any organization that issues refunds and credits—such as state and local government agencies, utilities, healthcare providers and property management companies—must adapt to customers’ increasing trust in and desire for electronic payments. Keep reading to learn what’s changing for federal government agencies—and five best practices to implement electronic payments.

 

Paper checks are being phased out: the details

The federal government’s shift to electronic payments will reshape the payment process for many industries. Here’s a non-comprehensive list of who is impacted, what’s changing and how each can confidently navigate the switch to digital transactions.

  • Tax refunds: IRS guidance indicates the agency will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. Until told otherwise, taxpayers should continue using existing forms and procedures, including people filing 2024 returns on an extension, as long as they file prior to the end of 2025.
  • Social Security or veterans’ benefits payments: All federal agencies must transition to electronic funds transfer (EFT) and actively enroll recipients in digital payment methods, including the Social Security Administration and the U.S. Department of Veterans Affairs (VA).
  • Receipts: All receipts to the federal government must be processed electronically as soon as practicable. Agencies must eliminate the use of Treasury’s physical lockbox services and implement digital collection solutions.

Treasury will provide agencies with support and guidance throughout this transition.

 

Who’s affected, and how

Payment recipients will have faster access to funds via EFT or prepaid debit cards. Electronic payments are processed and credited much faster than paper checks, which must be printed, mailed, and then cleared by a bank. Furthermore, electronic payments have a lower risk of theft. The Bureau of the Fiscal Service instructs Americans who receive benefits or tax refunds by paper check to sign up for direct deposit, open a bank account (if needed), or sign up for a Direct Express debit card (where they can receive their monthly benefit payments electronically). People can apply for an exemption by submitting the “Request for Payment of Federal Benefits by Check” form.

The transition to electronic payments strengthens Treasury’s capabilities to identify improper payments, prevent fraud, and manage disbursement operations efficiently and securely. Treasury will support payment verification by:

  • Updating systems and guidance to ensure all federal payments are subject to pre-certification verification processes
  • Providing new guidelines to promote compliance with the Do Not Pay Working System (that verifies eligibility of a vendor or beneficiary to receive federal payments)

Payers who get used to making and receiving electronic payments—and having more options—may expect other businesses to offer digital payments (including digital wallets), self-service portals, and payment plans (e.g., installments). ISVs—and businesses—must provide modern, convenient payment experiences or risk losing customers.

 

Real-world use cases

How can you use modern digital payments to increase efficiency and reduce costs and fraud?

  • ISVs serving government agencies: Embed payment tools such as account capture, account validation (using instant verification or micro-deposits), tokenization and Account Updater into your software platform. Make exception dashboards visible to agency staff, to simplify and accelerate the management of payments that couldn’t be processed due to errors, insufficient funds, or a stop payment order.
  • State and local governments: To reduce mailing costs and check fraud, issue refunds for taxes and/or services via Automated Clearing House (ACH) or—for residents without a bank account—pre-paid debit card.
  • Utilities: Return deposits or account credits electronically instead of mailing a check. To prevent misdirected funds, validate bank account information when a customer sets up recurring payments using ACH. To protect cash flow and prevent service disconnection due to non-payment, use a recovery service to automate the collection of funds when a customer’s payment fails.
  • Healthcare providers: In addition to issuing refunds digitally, provide electronic bill presentment and payment and flexible payment plans.

 

5 best practices for electronic payment processing

As organizations adapt to the new era of electronic payments, implementing effective digital payment processing strategies is essential for security, efficiency and customer satisfaction. The following best practices will help agencies and businesses transition smoothly. A smooth transition can help minimize payment errors and enhance the overall payment experience for both payers and recipients by:

  1. Capturing and verifying bank credentials at scaleCSG Forte’s BillPay tool provides self-service bank information capture. Sensitive payment data captured from the Payment Card Industry (PCI)-compliant form is tokenized and stored on secure servers, reducing PCI scope. Use CSG Forte’s Validate solution to verify that the ACH transaction routing number is valid and the customer’s account is open and existing. This reduces errors, payment failures and fraud risk.
  2. Keeping account information current to reduce failed payments: CSG Forte’s Account Updater automatically updates payment methods when a customer’s credit card information (such as expiration date or account number) changes. Scheduled prompts to proactively remind customers to refresh their banking data. View return codes on the CSG Dex dashboard and use Dex to power your outreach regarding account updates.
  3. Giving payers a choice of secure payment methods and channels: Improve customer experience and reduce late payments by allowing customers to pay and receive refunds using ACH, credit or debit cards, digital wallets, or prepaid debit cards (for refunds/reimbursements). Let them pay online, by phone [through interactive voice response (IVR) or a live agent] or in person using a point of sale terminal. Reduce live agent payment calls by up to 70% with CSG Forte’s IVR solution. You can also boost IVR payment security by using CSG Forte’s Live Agent Assist, which allows contact center agents to send customers a link to custom online invoices (generated on the spot), enabling customers to pay directly without sharing their payment information with someone who may leak it. CSG Forte’s payment solutions utilize tokenization, PCI-validated end-to-end encryption and hosted payment pages to protect data during every payment transaction, reducing the risk of fraud and account takeover. Implement multifactor authentication and payment authentication to further protect sensitive information.
  4. Communicating proactively: Use CSG Forte to send payment reminders, confirmations and late notices—including a link to a custom invoice—via each customer’s preferred channel. This reduces late payments and contact center calls (“did you get my payment?”). Use in-flow banners, emails and texts to prompt customers to add/update their bank information and opt into autopay and/or electronic disbursements.
  5. Automate reporting: Dex provides real-time visibility into payment transactions (e.g., deposits, rejects and disputes), streamlining the identification and management of payments that weren’t processed.

 

CSG Forte—everything you need to manage payments

CSG Forte is an integrated, customizable payments solution that makes it simple to accept payments online, by phone using IVR, and in person. Plus, you can verify accounts, manage payment returns and automatically update account information to better manage one-time and recurring payments. Ready to start your journey with Forte? Reach out today to talk to an expert and learn how we can help you modernize your payment system. Want to learn more first? Check out our government payment-focused eBook.