Public-Sector Payments Prepare for $175B Shift to Digital

A shift in public-sector disbursements is underway.

Beginning Sept. 30, all federal agencies must replace paper-based payments with digital disbursements, including real-time payments, direct deposit, prepaid cards and digital wallets. The move stems from a March executive order — Modernizing Payments to and From America’s Bank Account — and marks an evolution in how the United States government delivers money.

At stake is more than convenience. The federal government processed $175 billion in paper checks in 2024, at a cost of nearly $700 million in system support alone. Fraud concerns are another key driver. Department of Treasury-issued checks are 16 times more likely to be lost, stolen or altered than digital payments. According to the 2025 AFP Payments Fraud Survey, 63% of organizations still experienced check fraud, despite a decline in usage.

Replacing checks with digital and real-time rails — including automated clearing house (ACH), the RTP® network, the FedNow® Service and digital wallet disbursements — introduces a higher standard for speed, transparency and operational resilience. The shift also addresses consumer demand. Ninety percent of Americans now say they would prefer to receive disbursements instantly if given the choice. The data signals a generational shift, especially as Generation Z’s preference for mailed tax refunds dropped 10 percentage points in one year.

Still, digital transformation at this scale requires more than policy. It demands system overhauls, user education and infrastructure investment. Financial institutions and government agencies must coordinate to ensure access for underbanked households and those without digital tools.

Phasing out paper checks isn’t just a tech upgrade — it’s a redefinition of how the U.S. government meets its financial obligations. For the financial sector, this moment creates an opportunity to lead in building the rails, systems and relationships that will shape the future of disbursements.

Download the Tracker Government Goes Digital: Phasing Out Federal Checks Opens Door to Instant Payments

About “Government Goes Digital: Phasing Out Federal Checks Opens Door to Instant Payments”

The “Money Mobility Tracker®,” a collaboration with Ingo Payments, explores how certainty has joined choice and convenience in the factors driving instant payments into the mainstream of consumer demand.