The Green Sheet Online Edition
February 2, 2026 • 26:02:02
Fed rethinks its role in check clearing system
The Federal Reserve is rethinking its role in the check payment system. But it looks like public support is sparse. The Fed's Board of Governors issued a request for information (RFI) in December 2025, seeking input on the impact of potential changes to check clearing and settlement services provided by the 12 Federal Reserve Banks.
The Federal Reserve Act of 1913 and the Monetary Control Act of 1980 lay out the Fed's responsibilities for clearing and settling check payments. The Check Clearing for the 21st Century Act (commonly known as the Check 21 Act) made important changes to how those responsibilities were carried out, namely laying the foundation for clearing images in lieu of paper checks.
During the 15 years since the Check 21 Act took effect, electronic payments have chipped away at check usage. Still, American consumers and businesses continue to rely on checks. In 2023, the most recent year for which data is available, 3.3 billion checks cleared through the Fed and between banks.
Dependance on checks still strong
While that is a significant decline from 13 billion in 2018 and 40 billion at the turn of the century, checks still represent substantial volume and value. The average check in 2023 totaled $2,685, according to the Fed. Though checks account for only 5 percent of noncash transactions, they represent 21 percent of noncash payment value.
As Fed Vice Chair Michelle Bowman wrote in a statement accompanying the Fed's RFI, "Checks remain important payment mechanisms for consumers and businesses." Bowman was the lone vote among members of the Fed Board of Governors against the RFI.
David Walker, a consultant who previously led the Electronic Check Clearing House Organization (ECCHO), stated during an interview that the total value of checks cleared in the United States rivals the nation's GDP. Fed data suggests the total value of check payments in 2021 was $27.23 trillion. That same year, U.S. GDP was $23 trillion. (In 2025, U.S. GDP was $30 trillion.)
And the role of checks doesn't seem likely to change any time soon. A recent survey by the Association for Financial Professionals found 91 percent of companies still use checks for business-to-business payments; 75 percent of surveyed companies reported no plans to reduce check usage in the near term.
It's not just large corporations that rely on checks. "Many small businesses will depend upon check services for the foreseeable future," the National Federation of Independent Businesses wrote in a letter responding to the RFI. It urged the Fed to not employ any strategy to wind down check services.
The payments association EPCOR polled its membership (largely financial institutions) and reported that 85 percent see Reserve Bank check services as important despite declining volumes, "particularly for B2B payments, rural communities and legacy workflows." It said members emphasized the Fed's "value as a neutral provider that supports stability, risk mitigation and interoperability – especially for community banks and credit unions."
The nub of the Fed's thinking
"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," the Fed explained in its RFI. With most of the costs fixed there is "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 recovering requirements established by the MCA."
The MCA requires the Fed to recover the full cost of providing payment services, pricing those services as though it were a private-sector for-profit enterprise.
"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," the Fed stated in a memorandum accompanying its RFI.
It offered the following four potential strategies:
- Continue providing services as they exist today, with no money spent to improve or enhance check services. Over time, of course, this will lead to a "significant" degradation of services, leading to frequent operational issues and extended service outages.
- A "simplification" of check services, including discontinuation of "certain offerings." This would entail minimizing infrastructure investments, and "material changes" in the level of service offerings.. For example, limiting hours of operation.
- "A substantial wind-down of the Reserve Banks' check services." This would eliminate "significant operating costs."
- Making the investments necessary to upgrade the aging check-processing infrastructure. This would increase operating costs, which then would need to be recouped through higher service prices.
Comments skew toward spending money
The deadline for public comments is March 9, 2026. But as of early February, the Fed had received well over 200 comment letters, most of which seem to oppose any degradation of services.
This comment from North Star Community Credit Union, in North Dakota, expressed a prevailing opinion of small financial institutions. "The Reserve Banks provide a neutral, resilient infrastructure that promotes equitable access, competition, and operational reliability – especially for community banks and credit unions that may not have viable private sector alternatives at scale. A significant reduction or winding down of these services could disproportionately impact smaller financial institutions and the communities they serve," North Star stated.
"For these reasons," the credit union added, "continued investment in and support of Federal Reserve check services is necessary. Any future strategy should preserve a baseline level of service that ensures checks remain a reliable and accessible payment option."
First Bank and Trust in Brookings, S.D., wrote, "In our view, check usage is unlikely to materially change over the next three years within our communities. However, over the next decade we expect a significant reduction as digital payment tools become more user-friendly, broadband access improves, and generational shifts occur. A long-term transition strategy should therefore be intentional, gradual, and centered on accessibility, affordability and consumer readiness."
Consumers who submitted comment letters (and there were dozens), don't seem ready for an economy where checks are no longer a payment option. Several cited the fees associated with electronic payment options, as well as hacks involving credit and debit cards, as their reasons for wanting the Fed to continue supporting check payments.
"One would think the last thing the government would want to do is increase customer cost and aggravation by this action while also diminishing the ability for regular folks to pay their bills on time," wrote one consumer.
"My personal opinion is to upgrade the infrastructure, but with money appropriated by Congress," wrote another. (No tax dollars are used to fund Fed operations. Its payment system services are funded entirely by fees FIs pay for those services.)
"When the free market ceases at some point in the future to make significant use of checks, then and only then should the [Fed] consider leaving the entirety of check clearing services to whatever private sector entities still provide those services at the time," wrote the NFIB. "The day may come when the [Fed] can stop doing check-clearing work (assuming the law allows the Fed to stop), but that day is not today, and that day is clearly a long way off."
What about making checks electronic?
Walker suggested that many of the concerns expressed by the Fed and commenters could be addressed by electronically created items (ECIs). "The ECI is a good alternative for every use case," Walker said.
ECIs are viewed primarily, but not exclusively, as replacements for paper checks, Walker noted, adding they are digital images, not unlike the images created in a remote deposit capture (RDC) scenario, except ECIs never exist in paper form.
The process of clearing checks between banks has been fully electronic, using check images, since 2011, so the necessary investments by FIs have been made and fully amortized, Walker pointed out. Relying on ECIs, businesses would continue to follow essentially the same processes used for paper checks, but without the costs associated with handling paper. In a white paper published in 2018, Walker estimated businesses could save more than $20 billion annually by ditching checks in favor of ECIs.
ECIs are governed primarily by Fed Regulation CC (the rule set that addresses check funds availability and RDC). Because they are difficult to distinguish from check images, a bank that transfers or presents an ECI for payment must provide warranties and indemnities against losses. This has been a major stumbling block to widespread acceptance and use of ECIs.
Walker asserted that real-time ECIs offer many of the same advantages as real-time credit payments, such as FedNow or RTP. For example, there is no need to contract with real-time payment services providers since there is a system in place that supports the clearing of electronic checks between accounts at FIs.
Businesses don’t need special network connections to use ECIs, Walker said, though new enhanced positive pay services may require them. Positive pay is a cash management service financial institutions provide to help businesses prevent check fraud. 
Patti Murphy is senior editor at The Green Sheet, president of ProScribes Ink (www.proscribes.net) and self-described payments maven of the fourth estate. Her Today in Payments reports are a regular feature of the Merchant Sales Podcast.
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