Banking and Finance Law Daily Wrap Up, CHECKS AND ELECTRONIC TRANSFERS—Trade groups offer views on Fed’s scaling back bank check services, (Mar 10, 2026)

By Nora Macaluso

The Fed says use of paper checks is declining, and it would have to make substantial investments to continue providing services.

Trade groups have offered their opinions on the Federal Reserve’s inquiry about whether it should phase out check services, with banking associations making suggestions for an orderly transition and public interest group Better Markets warning of potential harm to consumers from a too-quick shift to electronic payments.

The Fed issued a request for public comment on the impact of “potential strategic changes” to the check services it provides (see Banking and Finance Law Daily, Dec. 5, 2025). Noting that Reserve Banks offer fee-based check collection and processing services to banks and credit unions, the Fed said that it is undertaking the inquiry as “check use has steadily declined, digital payment methods have grown in availability and use, and check fraud has risen.” The Fed also said Reserve Banks would “need to make substantial investments in their check infrastructure to continue providing the same level of check services going forward.”

The American Bankers Association (ABA) and Consumer Bankers Association (CBA) agreed with the Fed that the current “trajectory is not sustainable over the long term.” However, the groups said in a joint comment letter, “billions of paper check transactions are still processed annually and continue to provide essential benefits to many users,” and check services must continue as consumers and businesses transition completely to electronic payment methods.

The ABA and CBA suggested the Fed use a combination of strategies to manage the transition, adopting a long-term approach to encourage the shift to electronic payments and discontinuing paper-check services that can be eliminating without causing “undue harm.”

The banking groups recommended the Fed lead an industry group to “inform the public of the benefits of electronic payments,” providing guidance for small businesses and partnering with consumer advocates and small-business groups. Their letter included a 10-year “roadmap” for the transition, and they said they are ready to work with the Fed to modernize the system while preserving essential services “during a responsible and orderly transition.”

Better Markets, meanwhile, said scaling back check services too quickly would harm community banks and their customers.

“Modernizing our payments system should not come at the expense of financial inclusion or stability, particularly for more vulnerable consumers and community banks,” Better Markets said in a comment letter.

“We strongly support the continued transition to electronic payments for customers, but we have several serious concerns with an approach that would substantially wind down the Federal Reserve’s check services, particularly without a substantial public information campaign and significant lead time,” the letter said.

Among those concerns are the potential for consumers to be required or incentivized to use cryptocurrency, a disproportionate impact on community banks that “lack scale to develop or contract private alternatives,” and an effect on quality of key check services.

“Given the persistent decline in check usage, the rapid evolution of payment technologies, and the potential for greater efficiency, it is appropriate to undertake a strategic review of the Federal Reserve’s check services,” Better Markets said. “However, any future policy changes should be guided by careful analysis of the potential impacts on underserved communities, the possible shift toward increased cryptocurrency payment usage, the effect on community banks, and the need to preserve critical service elements currently provided through the Federal Reserve’s check services.”

“A robust public engagement process would be critical to ensure future changes (particularly material reductions in services) to these core payments services are well-understood by the public and financial institutions,” Better Markets’ letter concluded.

Companies: American Bankers Association; Better Markets; Consumer Bankers Association

RegulatoryActivity: BankingOperations ChecksElectronicTransfers CommunityDevelopment FederalReserveSystem