Notice2025-22272
Request for Information and Comment on the Future of the Federal Reserve Banks' Check Services
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 9, 2025
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) seeks public input on questions related to the future of the Federal Reserve Banks' (Reserve Banks') check services. The Board will use responses to this request for information (RFI) to assess possible strategies for the future of the Reserve Banks' check services, including potentially substantial changes that may have longer run effects on the payments system. In addition, the Board will use responses to this RFI to analyze other actions that the Federal Reserve System could consider with respect to checks, in partnership with the industry, to support the overall safety and efficiency of the payments system.
Full Text
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<title>Federal Register, Volume 90 Issue 234 (Tuesday, December 9, 2025)</title>
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[Federal Register Volume 90, Number 234 (Tuesday, December 9, 2025)]
[Notices]
[Pages 57062-57067]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-22272]
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FEDERAL RESERVE SYSTEM
[Docket No. OP-1874]
Request for Information and Comment on the Future of the Federal
Reserve Banks' Check Services
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Request for information and comment.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
seeks public input on questions related to the future of the Federal
Reserve Banks' (Reserve Banks') check services. The Board will use
responses to this request for information (RFI) to assess possible
strategies for the future of the Reserve Banks' check services,
including potentially substantial changes that may have longer run
effects on the payments system. In addition, the Board will use
[[Page 57063]]
responses to this RFI to analyze other actions that the Federal Reserve
System could consider with respect to checks, in partnership with the
industry, to support the overall safety and efficiency of the payments
system.
DATES: Comments must be received by March 9, 2026.
ADDRESSES: You may submit comments, identified by Docket No. OP-[1874],
by any of the following methods:
<bullet> Agency Website: <a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a>. Follow the instructions for submitting comments, including
attachments. Preferred Method.
<bullet> Mail: Benjamin W. McDonough, Deputy Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
<bullet> Hand Delivery/Courier: Same as mailing address.
<bullet> Other Means: <a href="/cdn-cgi/l/email-protection#f38386919f9a90909c9e9e969d8780b3958191dd949c85"><span class="__cf_email__" data-cfemail="324247505e5b51515d5f5f575c4641725440501c555d44">[email protected]</span></a>. You must include the
docket number in the subject line of the message.
Comments received are subject to public disclosure. In general,
comments received will be made available on the Board's website at
<a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a> without change and will
not be modified to remove personal or business information including
confidential, contact, or other identifying information. Comments
should not include any information such as confidential information
that would be not appropriate for public disclosure. Public comments
may also be viewed electronically or in person in Room M-4365A, 2001 C
St. NW, Washington, DC 20551, between 9 a.m. and 5 p.m. during Federal
business weekdays.
FOR FURTHER INFORMATION CONTACT: Kathy Wilson, Retail Payments Manager,
and Dani Figueiras, Financial Institution Policy Analyst, Division of
Reserve Bank Operations and Payment Systems at (202) 452-3000. For
users of text telephone systems (TTY) or any TTY-based
Telecommunications Relay Services, please call 711 from any telephone,
anywhere in the United States.
SUPPLEMENTARY INFORMATION:
I. Introduction
The paper check has long served as a cornerstone of the nation's
payments system. As an alternative to paper currency, checks have
historically provided several benefits to users, including convenience,
efficiency, and lower risk compared with cash. These important elements
contributed to widespread adoption of checks throughout the twentieth
century as a preferred noncash payment instrument. Even today, despite
the availability of electronic alternatives and growing prevalence of
check fraud, checks maintain a meaningful presence in the payments
system. However, over the last several decades, check usage in the
United States has declined steadily, even as the overall number of
noncash payments has grown considerably.\1\
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\1\ See Federal Reserve Board, ``Federal Reserve Payments Study:
Latest Figures,'' (2024), available at <a href="https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm">https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm</a>, in
tabular form. The Federal Reserve Payments Study is an ongoing
effort to estimate aggregate trends in noncash payments in the
United States. Reports and updated data are periodically released by
the Board at <a href="https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm">https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm</a>. Estimates from the Federal Reserve Payments
Study are produced on a triennial basis, except for card payments
which are estimated annually.
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As authorized by Congress, the Reserve Banks have long been an
important provider of check collection and processing services (check
services), which facilitate the movement of information and funds
between banks.\2\ The Reserve Banks continue to play this operational
role alongside other, private-sector check services providers, with the
Reserve Banks processing millions of checks deposited by banks each
day.
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\2\ See Check Clearing and Collection, Circular No. 1, Series of
1916, 2 Fed. Res. Bull. 259 (May 1, 1916) (announcing the
establishment of a check collection and clearing system operated by
the Reserve Banks). The need to improve the nation's check-clearing
system was one rationale for the founding of the Federal Reserve
System through the Federal Reserve Act. See The Federal Reserve
System, ``The Federal Reserve in the Payments Mechanism,'' (January
1998), available at <a href="https://fraser.stlouisfed.org/title/federal-reserve-payments-mechanism-7148">https://fraser.stlouisfed.org/title/federal-reserve-payments-mechanism-7148</a>.
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In light of the steady decline in check use, the Reserve Banks'
aging check infrastructure, and other factors described below, the
Board is seeking views from the payments industry and wider public on
potential strategies for the future of the Reserve Banks' check
services. Such strategies could range from foregoing needed investments
to keep operating costs at existing levels, with expected service
degradation over time; to significantly simplifying or substantially
winding down the services, with reduced operating costs; to investing
heavily to maintain and potentially improve the services with higher
operating costs. In all cases, such operating costs would need to be
recovered through fees charged to depository institutions that use the
Reserve Banks' check services, as required by the Monetary Control Act
(the MCA).\3\
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\3\ See 12 U.S.C. 248a. See also Principles for the Pricing of
Federal Reserve Bank Services, 46 FR 1338, 1339 (Jan. 6, 1981),
available at <a href="https://www.federalreserve.gov/paymentsystems/pfs_principles.htm">https://www.federalreserve.gov/paymentsystems/pfs_principles.htm</a>. The MCA requires the Federal Reserve to recover
the direct and indirect costs of providing its priced services over
the long run. The Board currently views a 10-year cost recovery
expectation as appropriate for assessing mature services, which are
those that have achieved a critical mass of customer participation
and generally have stable and predictable volumes, costs, and
revenues. Cost recovery includes financing costs, taxes, and certain
other expenses, as well as the return on equity (profit) that would
have been earned if a private-sector business provided the services.
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To better assess these potential strategies and the related
tradeoffs, the Federal Reserve is also seeking public input on factors
that it should consider with respect to the future of its check
services, such as the importance and persistence of checks in the U.S.
payments system and the public's willingness to incur additional costs
or make additional investments to support the continued use of checks.
II. Trends in Check Usage
At the turn of the twenty-first century, more than 40 billion
checks were written annually in the United States, greater than the
total number of automated clearinghouse (ACH), credit card, debit card,
and prepaid card transactions combined.\4\ The number of checks written
has steadily declined since then while the use of other payment methods
has grown; about 11 billion checks were written in 2021, accounting for
approximately 5 percent of overall noncash payments.\5\ Despite the
overall decline in the number of checks written, however, checks
continue to have a notable presence in the payments system; in 2021,
the value of check payments stood at $27.23 trillion, which was
approximately 21 percent of noncash payments value.\6\
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\4\ For instance, in 2000 the number of checks (42.6 billion)
exceeded the total number of ACH and credit and debit card
transactions (29.9 billion). See Federal Reserve Board, ``Federal
Reserve Payments Study: Latest Figures,'' (2024), available at
<a href="https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm">https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm</a>,
in tabular form <a href="https://www.federalreserve.gov/paymentsystems/2024-The-Federal-Reserve-Payments-Study-Initial-Data-accessible.htm">https://www.federalreserve.gov/paymentsystems/2024-The-Federal-Reserve-Payments-Study-Initial-Data-accessible.htm</a>.
\5\ Ibid.
\6\ See Federal Reserve Board, ``The Federal Reserve Payments
Study: 2022 Triennial Initial Data Release,'' (2023), available at
<a href="https://www.federalreserve.gov/paymentsystems/2023-April-The-Federal-Reserve-Payments-Study.htm">https://www.federalreserve.gov/paymentsystems/2023-April-The-Federal-Reserve-Payments-Study.htm</a>.
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The substantial decline in check use can be primarily attributed to
the increasing availability and use of payment alternatives. Today,
there are multiple types of electronic payments that could be used as
alternatives to
[[Page 57064]]
checks, such as instant payments, ACH transactions, credit and debit
card payments, and various bank and nonbank payment service
alternatives. For example, credit and debit cards (at the point of
sale) and ACH payments (for bill and invoice payments) are used more
commonly than checks.\7\ In the last decade alone, several major
developments in payments have taken place that have facilitated the
adoption of alternatives to checks. Notable examples in the United
States include the introduction of same-day ACH transactions, the
launch of two major instant payment systems, and the rise of many peer-
to-peer payment services.\8\ In addition, the COVID-19 pandemic
contributed to the accelerated migration of payments activity to
electronic payments.\9\
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\7\ See Federal Reserve Board, ``The Federal Reserve Payments
Study 2016: Recent Developments in Consumer and Business Choices''
(2017), available at <a href="https://www.federalreserve.gov/paymentsystems/2017-june-recent-developments.htm">https://www.federalreserve.gov/paymentsystems/2017-june-recent-developments.htm</a>.
\8\ The Clearing House launched its instant payment system in
2017, and the Federal Reserve implemented its instant payment
service in 2023. For purposes of this notice, ``instant payments''
is defined as payments that can be made at any hour of the day,
every day of the year, with immediate funds availability for
receivers.
\9\ McKinsey's 2023 Digital Payments Consumer Survey found that
more than 9 out of 10 consumers said they had used some form of
digital payment, defined as using a computer or mobile device to
purchase goods or services via an app, website, or in-store
terminal, over the course of the year. This trend had grown steadily
over the survey's eight years and accelerated during pandemic
lockdowns. It first exceeded 80 percent of consumers in 2021. See
McKinsey & Company, ``Consumer digital payments: Already mainstream,
increasingly embedded, still evolving'' (2023), <a href="https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/consumer-digital-payments-already-mainstream-increasingly-embedded-still-evolving">https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/consumer-digital-payments-already-mainstream-increasingly-embedded-still-evolving</a>.
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Still, check usage persists within specific categories of users and
use cases, especially for payments between peers (that is, consumer-to-
consumer or business-to-business).\10\ The enduring use of checks may
in part be attributable to unique characteristics of the instrument,
such as familiarity, accessibility, low cost for some end users, and
the ease of use (for example, mobile deposit), or barriers to adoption
of alternatives. For instance, businesses, as primary users of checks,
may experience additional costs and barriers to adopting electronic
payments, including the need to modernize their treasury practices,
accounting processes, and infrastructures for accepting and disbursing
payments.\11\ Other barriers to adopting electronic payments could
include requirements by banks for organizations to undergo risk
assessments before being able to originate certain payments, such as
ACH transfers. Check usage by consumers also varies across factors such
as age, geography, and household income. For example, consumers aged 65
or older, who are more likely to use checks than any other age group,
may face challenges shifting to other payment methods.\12\ As another
example, more frequent use of checks is observed among consumers living
in rural areas.\13\ Low- and moderate-income individuals are also less
likely to use electronic payment methods and may continue to rely on
checks more heavily than other populations to pay bills and receive
income.\14\ For example, low-income consumers are more likely than
consumers overall to pay bills using non-electronic methods.\15\
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\10\ For data related to how check usage varies across
transaction value, age, household income, etc., see Federal Reserve
Financial Services, ``2024 Diary of Consumer Payment Choice''
(2024), <a href="https://www.frbservices.org/news/research/2024-findings-from-the-diary-of-consumer-payment-choice">https://www.frbservices.org/news/research/2024-findings-from-the-diary-of-consumer-payment-choice</a>.
\11\ By value, business checks constituted more than three-
quarters of all commercial checks in 2021. See Federal Reserve
Board, ``National Payment Volumes, Detailed Data, DFIPS (CY 2021),''
(2025), available at <a href="https://www.federalreserve.gov/paymentsystems/frps-dfips-cy-2021.htm">https://www.federalreserve.gov/paymentsystems/frps-dfips-cy-2021.htm</a>. Checks are the most commonly accepted form
of payment for small businesses, which could pose additional
challenges for small businesses transitioning to other payment
methods. See Fed Small Business, ``2024 Report on Payments: Findings
from the 2023 Small Business Credit Survey'' (2024), <a href="https://www.fedsmallbusiness.org/reports/survey/2024/2024-report-on-payments">https://www.fedsmallbusiness.org/reports/survey/2024/2024-report-on-payments</a>.
\12\ According to the Federal Reserve Bank of Atlanta, more than
63 percent of consumers aged 65 or older reported writing a check in
the last month compared with approximately 4 percent of consumers
from the ages 18-24. See Kevin Foster, Claire Greene, and Joanna
Stavins, ``2024 Survey and Diary of Consumer Payment Choice,''
Federal Reserve Bank of Atlanta (May 2025), <a href="https://www.atlantafed.org/banking-and-payments/consumer-payments/survey-and-diary-of-consumer-payment-choice/2024-survey-and-diary#Tab2">https://www.atlantafed.org/banking-and-payments/consumer-payments/survey-and-diary-of-consumer-payment-choice/2024-survey-and-diary#Tab2</a>.
\13\ See Claire Greene, Julian Perry, and Joanna Stavins,
``Consumer Payment Behavior by Income and Demographics,'' Federal
Reserve Bank of Boston Working Paper No. 24-2 (2024), https://
www.atlantafed.org/-/media/documents/banking/consumer-payments/
research-data-reports/2024/10/07/02_consumer-payment-behavior-by-
income-and-demographics.pdf.
\14\ The FDIC's 2023 National Survey of Unbanked and Underbanked
Households showed the proportion of U.S. households that were
unbanked was higher among lower-income households. Compared with
banked households, higher shares of unbanked households used money
orders, check cashing, and money transfer services for the core
transactions of paying bills and receiving income. See Federal
Deposit Insurance Corporation (FDIC), 2023 FDIC National Survey of
Unbanked and Underbanked Households (November 2024), <a href="https://www.fdic.gov/household-survey">https://www.fdic.gov/household-survey</a>. See also Claire Greene, et al. ``US
Consumers' Use of Personal Checks: Evidence from a Diary Survey.''
Federal Reserve Bank of Atlanta Research Data Report (2020): 20-1),
<a href="https://www.atlantafed.org/-/media/documents/banking/consumer-payments/research-data-reports/2020/02/13/us-consumers-use-of-personal-checks-evidence-from-a-diary-survey/rdr2001.pdf">https://www.atlantafed.org/-/media/documents/banking/consumer-payments/research-data-reports/2020/02/13/us-consumers-use-of-personal-checks-evidence-from-a-diary-survey/rdr2001.pdf</a>.
\15\ When paying bills, low-income consumers are less likely to
use electronic fund transfers and more likely to use paper-based
payment methods (cash, money orders, and checks) than consumers
overall. See Ying Lei Toh, ``When Paying Bills, Lower-Income
Consumers Incur Higher Costs,'' Federal Reserve Bank of Kansas City
(November 23, 2021), https://www.kansascityfed.org/research/
payments-system-research-briefings/when-paying-bills-low-income-
consumers-incur-higher-costs/
#:~:text=Moreover%2C%20low%2Dincome%20consumers%20were,mail%2C%20ther
eby%20incurring%20higher%20costs.
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At the same time, the nature and design of the check instrument has
made it a growing target for fraud, and from 2018 to 2021, the share of
returned checks handled by the Reserve Banks that were potentially
fraudulent increased from 10.2 percent to 15 percent.\16\ Checks are
vulnerable to fraud because checks can be stolen, altered, or forged.
For instance, the physical nature of checks makes them susceptible to
theft while in transit or when left in unsecured locations.\17\ Checks
also contain visible sensitive information--the payor's name, account
number, routing number, address, and signature--that can be used by
criminals to conduct other forms of payments fraud.\18\
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\16\ See Federal Reserve Bank of Atlanta, ``Checks Processed by
the Federal Reserve in 2021,'' <a href="https://www.atlantafed.org/-/media/documents/rprf/publications/check-sample-survey/2023/05/05/2021-survey/report.pdf">https://www.atlantafed.org/-/media/documents/rprf/publications/check-sample-survey/2023/05/05/2021-survey/report.pdf</a>. There has been a disproportionate rise in the
rate of check fraud relative to other fraud types, even though check
volumes have decreased. For example, although check volumes
decreased more than 7 percent per year from 2018 to 2021, FinCEN
reported a 23 percent increase in suspected check fraud. See Federal
Reserve Board, ``The Federal Reserve Payments Study: 2022 Triennial
Initial Data Release,'' (2023), available at <a href="https://www.federalreserve.gov/paymentsystems/2023-April-The-Federal-Reserve-Payments-Study.htm">https://www.federalreserve.gov/paymentsystems/2023-April-The-Federal-Reserve-Payments-Study.htm</a>, and see Financial Crimes Enforcement
Network, ``FinCEN Alert: Nationwide Surge in Mail Theft-Related
Check Fraud Schemes Targeting U.S. Mail'' (February 27, 2023),
<a href="https://www.fincen.gov/news/news-releases/fincen-alert-nationwide-surge-mail-theft-related-check-fraud-schemes-targeting">https://www.fincen.gov/news/news-releases/fincen-alert-nationwide-surge-mail-theft-related-check-fraud-schemes-targeting</a>.
\17\ In 2023, FinCEN collected more than 15,000 Bank Secrecy Act
(BSA) reports of mail theft-related check fraud during a seven-month
review period. See Financial Crimes Enforcement Network, ``Financial
Trend Analysis'' (2024), <a href="https://www.fincen.gov/sites/default/files/shared/FTA-Check-Fraud-FINAL508.pdf">https://www.fincen.gov/sites/default/files/shared/FTA-Check-Fraud-FINAL508.pdf</a>.
\18\ The Association for Financial Professionals reported that a
recent rise in ACH fraud could be associated with criminals using
the banking information presented on checks to make unauthorized ACH
debits. See Association for Financial Professionals, ``Payments
Fraud and Control Survey Report,'' (2025), available at <a href="https://www.truist.com/content/dam/truist-bank/us/en/documents/info/cci/2025-afp-payments-fraud-control-survey-report-key-highlights.pdf">https://www.truist.com/content/dam/truist-bank/us/en/documents/info/cci/2025-afp-payments-fraud-control-survey-report-key-highlights.pdf</a>.
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Industry Views on the Future of Checks
As the nation's central bank, the Federal Reserve has regularly
partnered with the payments industry to support
[[Page 57065]]
initiatives aimed at improving the safety and efficiency of the
nation's payments system.\19\ In the early 2000s, for example, the
Federal Reserve supported the drafting of the Check Clearing for the
21st Century Act (Check 21 Act) and championed significant improvements
so that banks could handle checks more quickly and efficiently.\20\
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\19\ With respect to checks, the Federal Reserve made
significant contributions to the adoption of magnetic ink character
recognition (MICR) in the 1950s, which supported the automation of
check processing. See Bill Medley, Federal Reserve Bank of Kansas
City, ``Highways of Commerce: Central Banking and the U.S. Payments
System'' (July 2014) p. 74-75, available at <a href="https://fraser.stlouisfed.org/title/highways-commerce-7097">https://fraser.stlouisfed.org/title/highways-commerce-7097</a>. Two decades
later, in response to the growing burden of processing paper checks,
the Federal Reserve supported the development of the ACH network in
the 1970s and 80s. See Medley, p. 72-79.
\20\ Checks must start in writing as a physical instrument,
commonly paper. By agreement, however, banks may rely on an
electronic image of the original paper check to facilitate movement
of that information electronically, which increases greatly the
speed and efficiency of check collection and processing. The Check
21 Act facilitated electronic processing so that banks could rely on
an electronic image of the original paper check. Check Clearing for
the 21st Century Act, 12 U.S.C. 5001 et seq. See Medley, p 105.
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As technology advanced, providing an increasing number of
electronic alternatives, the Federal Reserve established a payment
system improvement initiative in 2013. As part of that effort, the
Federal Reserve asked for industry input on the role of checks in the
U.S. payments system, including industry's interest in migrating away
from checks and its sense of how disruptive such a change could be for
end users.\21\ While most respondents supported a transition toward
electronic alternatives, many indicated a preference for letting market
forces determine the pace of migration away from checks and the need
for further enhancements to alternative payment methods. Given these
responses, the Federal Reserve determined at the time not to materially
alter the Reserve Banks' check services.\22\
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\21\ See Federal Reserve Banks, ``Payment System Improvement--
Public Consultation Paper'' (September 2013), available at <a href="https://fedpaymentsimprovement.org/wp-content/uploads/2013/09/Payment_System_Improvement-Public_Consultation_Paper.pdf">https://fedpaymentsimprovement.org/wp-content/uploads/2013/09/Payment_System_Improvement-Public_Consultation_Paper.pdf</a>.
\22\ See Federal Reserve Banks, ``Strategies for Improving the
U.S. Payment System'' (January 2015), <a href="https://fedpaymentsimprovement.org/wp-content/uploads/strategies-improving-us-payment-system.pdf">https://fedpaymentsimprovement.org/wp-content/uploads/strategies-improving-us-payment-system.pdf</a>.
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In the decade since, check usage has continued to decline, and
further developments in the wider market could lead to a continued, or
even accelerated, decline in check volumes. For example, the U.S.
Department of Treasury issued an RFI to inform its implementation of
Executive Order 14247, which calls for the federal government to
transition away from checks to electronic payments for both
disbursements and collections, with limited exceptions.\23\ Various
sources also have indicated there may be changing views on the
importance of checks as a way to meet payment needs.\24\ For instance,
as reported in the most recent Survey and Diary of Consumer Payment
Choice, consumers rate checks relatively poorly for convenience,
security, and speed of payment.\25\ In addition, consumers in 2024
reported making relatively fewer check payments to payees that commonly
used to receive checks (such as contractors, churches, and property
managers).\26\ Notably, every age group wrote fewer checks as a share
of all their payments in 2024 than in 2015; even consumers aged 65 and
older, who are the highest users of checks, made about 6 percent of
their payments by check in 2024, compared with 11 percent in 2015.\27\
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\23\ See Request for Information Related to the Executive Order,
``Modernizing Payments To and From America's Bank Account,'' 90 FR
23108 (May 30, 2025).
\24\ Data indicate that the share of checks written by consumers
continues to decline, with consumers reporting an average of only
one check payment per month in 2023. See Berhan Bayeh, Emily
Cubides, and Shaun O'Brien, ``2024 Findings from the Diary of
Consumer Payment Choice,'' Federal Reserve Banks (2024), <a href="https://www.frbservices.org/binaries/content/assets/crsocms/news/research/2024-diary-of-consumer-payment-choice.pdf">https://www.frbservices.org/binaries/content/assets/crsocms/news/research/2024-diary-of-consumer-payment-choice.pdf</a>. See also Jonathan Rose,
``Check Payments,'' Federal Reserve History (September 28, 2023),
<a href="https://www.federalreservehistory.org/essays/check-payments">https://www.federalreservehistory.org/essays/check-payments</a>; Mike
Timoney, ``Why is check fraud suddenly rampant?'' Federal Reserve
Bank of Boston (August 23, 2023), <a href="https://www.bostonfed.org/news-and-events/news/2023/08/check-fraud-rampant-mike-timoney-column-fraud-awareness-key-to-slowing-surge.aspx">https://www.bostonfed.org/news-and-events/news/2023/08/check-fraud-rampant-mike-timoney-column-fraud-awareness-key-to-slowing-surge.aspx</a>.
\25\ See Kevin Foster, Claire Greene, and Joanna Stavins, ``2024
Survey and Diary of Consumer Payment Choice,'' Federal Reserve Bank
of Atlanta (May 2025), <a href="https://www.atlantafed.org/banking-and-payments/consumer-payments/survey-and-diary-of-consumer-payment-choice/2024-survey-and-diary#Tab2">https://www.atlantafed.org/banking-and-payments/consumer-payments/survey-and-diary-of-consumer-payment-choice/2024-survey-and-diary#Tab2</a>. Previous research has found that
these ratings are relevant for consumers' choice to own or use (or
to avoid owning or using) various payment instruments. See Joanna
Stavins, ``How Do Consumers Make Their Payment Choices?'' Federal
Reserve Bank of Boston (May 31, 2017) <a href="https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2017/rdr1701.pdf">https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2017/rdr1701.pdf</a>.
\26\ For instance, the share of payments via check decreased
from 53 percent in 2017 to 27 percent in 2024 for building
contractors, plumbers, electricians, etc. For charitable or
religious donations, the share of check payments decreased from 33
percent to 20 percent from 2017 to 2024. See Claire Greene,
``Innovations in Payments Acceptance Play out in Consumer Check
Use,'' Federal Reserve Bank of Atlanta (July 7, 2025), <a href="https://www.atlantafed.org/blogs/take-on-payments/2025/07/07/innovations-in-payments-acceptance-play-out-in-consumer-check-use?utm_medium=email&utm_source=mailchimp&utm_campaign=take-on-payments">https://www.atlantafed.org/blogs/take-on-payments/2025/07/07/innovations-in-payments-acceptance-play-out-in-consumer-check-use?utm_medium=email&utm_source=mailchimp&utm_campaign=take-on-payments</a>.
\27\ Ibid.
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III. The Reserve Banks' Check Services
The check-processing market has been dynamic over time. While the
trends discussed above illustrate the increasing availability and use
of alternative payment methods and the rise in check fraud in
particular, individuals and organizations continue to write checks,
with over 11 billion written in 2021. The Reserve Banks continue to
play a significant role in processing this volume, although the total
number of checks processed by the Reserve Banks peaked in 1992, and has
declined almost every year since. Over the past decade, the Reserve
Banks' commercial (nongovernment-issued) check volume declined more
than 6 percent on average year over year. Most recently in 2024, the
Reserve Banks processed nearly 3.0 billion commercial checks, which is
nearly 50 percent less than the 5.7 billion commercial checks the
Reserve Banks processed a decade ago.\28\ Internal estimates indicate
that the Reserve Banks currently process nearly half of the nation's
check volume overall, though they process a slightly lower portion of
the checks sent between depository institutions for payment and a
slightly higher portion of the checks returned unpaid.
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\28\ See Federal Reserve Board, ``Commercial Checks Collected
through the Federal Reserve--Annual Data,'' <a href="https://www.federalreserve.gov/paymentsystems/check_commcheckcolannual.htm">https://www.federalreserve.gov/paymentsystems/check_commcheckcolannual.htm</a>.
Reserve Bank data on check returns and government checks processed
are also reported. See ``Commercial Checks Returned through the
Federal Reserve--Annual Data,'' <a href="https://www.federalreserve.gov/paymentsystems/check_commcheckretannual.htm">https://www.federalreserve.gov/paymentsystems/check_commcheckretannual.htm</a>. See also ``Government
Checks Processed by the Federal Reserve--Annual Data,'' <a href="https://www.federalreserve.gov/paymentsystems/check_govcheckprocannual.htm">https://www.federalreserve.gov/paymentsystems/check_govcheckprocannual.htm</a>.
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When a depository institution receives a check deposit drawn on
another institution, the depository institution may choose to send the
check for collection to the other institution directly, deliver it to
the other institution through a private-sector exchange, or use the
check-collection services of a correspondent, service provider, or the
Reserve Banks. If the depository institution chooses the Reserve Banks'
check services, that institution may choose from a menu of electronic
and paper options for when and how its checks are sent for collection
based on deposit deadlines, the level of check sorting done by the
depositing institution, and funds availability for checks deposited.
Generally, the Reserve Banks offer four deposit deadlines throughout
the day, and different levels of service associated with each of those
deposit deadlines. For example, the Reserve Banks offer services that
allow institutions to
[[Page 57066]]
choose how quickly their checks are processed and to tailor the
processing based on factors such as the dollar amount of the checks or
the institution the check is being sent to.
Similarly, when an institution determines not to pay a check (for
instance, because the check writer has insufficient funds, or the check
is suspected to be fraudulent), the Reserve Banks offer a range of
options for sending the check back as a return. In addition, the
Reserve Banks offer a variety of other related services, such as
information services that produce various reports and discrepancy
resolution services for 23 common issues (generally known as check
adjustments).
In total, as part of their check services, the Reserve Banks offer
more than 240 service variations that support institutions' choices
when processing checks. The vast majority of these services involve the
processing of electronic check information and images of paper checks,
but paper checks may also still be physically deposited for collection
or return through the Reserve Banks.
The Future of the Reserve Banks' Check Services
As the total number of checks processed by the Reserve Banks
declines, the long-term viability of the Reserve Banks' check services
is increasingly at risk. To maintain efficiency, the Reserve Banks
significantly reduced their operational footprint between 1979 and
2010, cutting the number of check-processing centers from 48 to
one.\29\ Today, however, the remaining expenditures for the Reserve
Banks' check services are largely fixed infrastructure costs, leaving
little room for additional cost reductions or efficiency gains that
would allow the Reserve Banks to continue providing the same level of
check services at current prices while still meeting the cost recovery
requirements established by the MCA.
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\29\ See Federal Reserve Bank of St. Louis, ``Federal Reserve
History: Check Payments'' (Sept. 28, 2023) available at <a href="https://www.federalreservehistory.org/essays/check-payments">https://www.federalreservehistory.org/essays/check-payments</a>.
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Additionally, the Reserve Banks' check-processing infrastructure is
aging and will soon require material investments relative to ongoing
operating costs to support existing service levels.\30\ Upgrading and
maintaining the Reserve Banks' check infrastructure will require
significant costs that, as required by law, the Reserve Banks would
need to recover over the long run through service fees.
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\30\ Operating costs for check services in 2024 were $104.5
million. See Federal Reserve Board, ``Federal Reserve Board
announces pricing, effective January 1, 2026, for payment services
the Federal Reserve Banks provide to banks and credit unions,''
(December 2025), available at <a href="https://www.federalreserve.gov/newsevents/pressreleases/other20251204a.htm">https://www.federalreserve.gov/newsevents/pressreleases/other20251204a.htm</a>.
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Given the magnitude of potential investments, declining volumes,
and trends in the check market more broadly, the Board believes that
the time is appropriate to analyze a range of possible strategies for
the future of the Reserve Banks' check services.\31\ Such range could
include:
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\31\ The Reserve Banks regularly adjust their check services,
products, and fees in response to market and other business factors.
The Reserve Banks will continue to employ these types of changes in
the normal course of managing the check services, including price
increases, revisions to products and services, and reductions or
enhancements in service depending on the circumstances.
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1. A continuation of the Reserve Banks' check services largely as
they exist today without investments to address aging infrastructure.
This strategy would allow the Reserve Banks to maintain the existing
cost base for operating the services. Over time, however, this strategy
would result in significant degradation of the services' reliability,
leading to increasingly frequent operational issues, processing
failures, and extended service outages.
2. A significant simplification of the Reserve Banks' check
services, including discontinuation of certain offerings, with the
intention to minimize infrastructure investments that must be recovered
through service fees charged to depository institutions as required by
the MCA. This strategy could include material changes such as reducing
the number of deposit deadlines, limiting hours of operation,
eliminating check adjustment services, reducing resiliency levels, or
more likely, some combination of such changes.\32\
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\32\ As an example, if the Reserve Banks eliminated check
adjustment services, the Reserve Banks would only resolve debit or
credit settlement discrepancies caused by the Reserve Banks, and
institutions would need to resolve all other types of errors or
other issues directly with one another. The Reserve Banks also could
consider eliminating value-added check services, such as data
reports for checks.
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3. A substantial wind-down of the Reserve Banks' check services.
This strategy would allow the Reserve Banks to eliminate significant
operating costs in the foreseeable future.
4. An upgrade to the Reserve Banks' aging check-processing
infrastructure, which would require substantial investment. This
strategy would continue the Reserve Banks' check services largely as
they exist today and maintain the existing reliability of the services.
This strategy also could position the Reserve Banks to support
potential private-sector initiatives, such as enhancements to support
the security of the check instrument itself. Such efforts would result
in the Reserve Banks incurring significant additional costs to operate
the check services, which would need to be recovered through service
fees charged to depository institutions as required by the MCA.
The listed strategies are not intended to be comprehensive but
rather are illustrative examples of potential choices and outcomes for
the Reserve Banks' check services.
The Board recognizes that some potential strategies could include
significant changes that may affect the Reserve Banks' continued
operational presence as a provider of check services. The Board also
believes that to assess the future of the Reserve Banks' check
services, it is necessary to carefully weigh a number of elements,
including the current and potential future desire for the Reserve
Banks' check services, how the use of checks and the check industry may
evolve in the coming years, the availability of payment alternatives,
impacts on the broader payments system, and the benefits and drawbacks
of any potential approach. Public input on these factors, among others,
will support the Board in identifying and understanding the tradeoffs
of potential strategies for the Reserve Banks' check services.
IV. Request for Information
The Federal Reserve is committed to ongoing collaboration with the
industry to support a safe and efficient payments system in the United
States. The Board recognizes that different strategies for the Reserve
Banks' check services could have potentially significant effects on
stakeholders, including the financial services industry (for example,
banks, processors, and other check service providers) and check users
(including individuals and businesses who pay with or receive checks).
The Board therefore believes public input at this early stage is
essential to assess the future of the Reserve Banks' check services.
Specifically, this input will allow the Federal Reserve to analyze
possible strategies for the Reserve Banks' check services in light of,
among other factors, the public's view of the future of checks in the
nation's payments system. If the Board's analysis supports a strategy
for the Reserve Banks' check services that may have significant longer-
run effects on the nation's payments system, the Board would seek
comment again on any
[[Page 57067]]
specific proposal prior to adoption, consistent with Board policy.\33\
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\33\ See Principles for the Pricing of Federal Reserve Bank
Services, 46 FR 1338, 1339 (Jan. 6, 1981), available at <a href="https://www.federalreserve.gov/paymentsystems/pfs_principles.htm">https://www.federalreserve.gov/paymentsystems/pfs_principles.htm</a>.
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The Board also welcomes input on whether there are other actions it
should consider as the industry and public reflect on the continued
importance of checks. The Board separately released a request for
information on ``Potential Actions to Address Payments Fraud,''
including check fraud.\34\ Accordingly, the Board is not specifically
seeking input on check fraud in this RFI and asks for comments in
response to this RFI to focus on Reserve Bank check operations and the
continued use of checks more broadly. Respondents are encouraged to
respond to the following questions.
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\34\ The Fraud RFI was a joint release by the Board, the Federal
Deposit Insurance Corporation (FDIC), and the Office of the
Comptroller of the Currency (OCC). Comments were due by September
18, 2025. See Board, OCC, and FDIC, ``Request for Information on
Potential Actions To Address Payments Fraud,'' Federal Register
(June 20, 2025), <a href="https://www.federalregister.gov/documents/2025/06/20/2025-11280/request-for-information-on-potential-actions-to-address-payments-fraud">https://www.federalregister.gov/documents/2025/06/20/2025-11280/request-for-information-on-potential-actions-to-address-payments-fraud</a>.
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1. What is your view of the importance of the Reserve Banks' check
services in the United States today? How should the Federal Reserve's
role in the provision of check services evolve over the next 3 years
and over the next 10 years?
2. What aspects of the Reserve Banks' current check services (for
example, deposit deadline options, how quickly checks are processed,
discrepancy resolution services, and options for sending a check back
as a return) are the most critical, and why?
3. Generally speaking, what would be the impact of different
potential strategies for the Reserve Banks' check services, including
those discussed above: (1) continuing Reserve Banks' check services
largely as they exist today with significantly degraded reliability
over time, (2) significantly simplifying Reserve Banks' check services,
(3) substantially winding down Reserve Banks' check services, or (4)
upgrading the Reserve Banks' check-processing infrastructure to support
existing services and reliability? Are there other strategies you
believe the Reserve Banks should consider?
4. Would you, your organization, or your community be willing to
incur additional costs and fees to continue to use or process checks as
you do today? Why or why not? Would you, your organization, or your
community be willing to make additional investments such as
enhancements to check security features in support of continued use of
checks in the future? Why or why not?
5. If your organization relies on the Reserve Banks' check
services, directly or indirectly, to what extent could alternative
providers offer similar services that meet your needs over the next 3
years and over the next 10 years? For instance, are there unique
benefits of the check services provided by the Federal Reserve that are
not otherwise available in the industry?
6. How important are checks to you, your organization, or your
community, and how challenging would it be to use alternative payment
methods? How might the importance of checks and the challenges
associated with using other payment methods change over the next 3
years and over the next 10 years?
7. What are the unique aspects of checks that lead users to
continue to use checks?
8. How could other payment methods offer the same benefits as
checks if they do not already? Are there any barriers that prevent
alternative payment methods from offering the same benefits as checks,
or other constraints on adoption of these alternatives?
9. Do you have any planned or ongoing efforts to transition from
checks to electronic payments, and why or why not? How can particular
communities that may still need to rely on checks, such as the elderly,
rural populations, and low- or moderate-income households, be better
served?
10. What benefits and risks to the payments system and to the
public should the Board consider as it assesses potential strategies
for the Reserve Banks' check services?
In addition to these questions above, the Board invites comments on
any other considerations it should assess as it evaluates the future of
the Reserve Banks' check services.
By order of the Board of Governors of the Federal Reserve
System.
Benjamin W. McDonough,
Deputy Secretary of the Board.
[FR Doc. 2025-22272 Filed 12-8-25; 8:45 am]
BILLING CODE 6210-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.