Federal Reserve Weighs Shift to Electronic Payments as Gen Z Gawks at Check-Writing

With President Trump ordering an end to most government papers checks, it may seem that such financial tools are going the way of the penny. But even as digitally native Generation Z finds tasks like writing and mailing anachronistic, banks are still leaving a long paper trail — with the Federal Reserve leading the way. Getting rid of paper checks may not be so easy, a Boston University Questrom School of Business professor, Jay Zagorsky, tells The New York Sun. While customers use a bank app or digital currency for many of their transactions, behind the scenes, banks are making those payments with paper. People write “a fair number of checks without actually realizing it,” says Mr. Zagorsky, who studied check usage for an article he authored this month on the future of paper checks. “Last month when I paid my bills. I actually had two checks that were being sent for me on my behalf. And I don’t think people realize that checks are still being used.” Last year Mr. Trump signed an executive order directing all federal departments to end the use of paper checks for disbursements, including Social Security, a decision opposed by Senator Warren, who questions government transparency within the safety net. Some large retailers, including Target and Whole Foods, already no longer accept paper checks. The Federal Reserve’s latest report on the types of payments used across the country found 9.2 billion checks written in 2024, “which is pretty amazing,” Mr. Zagrosky contends, despite the total being dwarfed by digital payments such as credit and debit cards. In 2024, 236.6 billion non-cash transactions occurred in America, including nearly 40 billion transactions through the Automated Clearing House network, or ACH, which uses electronic and paper checks to pay bills, direct deposits, and manage business-to-business payments.As a clearing house for bank-to-bank transactions, the Fed writes almost one third of all checks in America. It handles checks that are not among large commercial banks in the same city or region. For instance, if a purchaser made a payment using a California bank and the recipient was at New York City, the check had to basically go through the Federal Reserve, Mr. Zagorsky explains.The central bank is considering exiting the check-processing business because of the rise of digital payments, rising costs associated with processing checks, and a growing problem of check fraud. To keep the system as is, however, it will need to spend millions to update its check processing infrastructure, the cost-benefit of which, so far, is undecided. The Fed asked for public input at the start of the year but has not reached a final decision yet.“If the Federal Reserve exits the business, then some of these smaller clearing houses would have to sort of pick up the slack,” Mr. Zagorsky said.Younger consumers consider checks an antiquated form of payment. According to a survey released last summer, just 26 percent of Generation Z college graduates have ever written a check. Only 22 percent have balanced a checkbook, though more than half have opened a checking account. Mr. Zagorsky says a lot of small businesses like and encourage check usage because of the costs associated with digital transactions. Those costs are the impetus for a growing trend of surcharges when paying by credit card. For large purchases the difference between paying by check or credit card can be $50 or more. “It starts adding up quite quickly,” Mr. Zagorsky says. Mr. Zagorsky, who is against the end of checks in America and calls himself “one of the few advocates for paper money in the world,” says plenty of people still want to personally touch their transactions.With Germany phasing out checks by the end of next year and Australia ending check use in 2030, Mr. Zagorsky also questions the impetus behind the rush to end check-writing. “Should people in government just say, ‘Okay, we’re getting rid of it because it’s more efficient for government’?” Mr. Zagorsky asks. “What’s the real idea of government? Is it to help people do what they want to do or is it to make decisions for us?”Mr. Zagorsky adds that similarly to people using pennies still in circulation, they are still using checks. “I’m not sure we should be getting rid of something that people with their actions show that they really like,” he says.

Federal Reserve Weighs Shift to Electronic Payments as Gen Z Gawks at Check-Writing

Federal Reserve Weighs Shift to Electronic Payments as Gen Z Gawks at Check-Writing

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