Modernizing Government Payments with Digital Solutions

To modernize its payment systems, the U.S. federal government will phase out paper checks for all disbursements September 30, 2025. This capability supports the administration’s “Modernizing Payments to and from America’s Bank Account” executive order which directs the federal government to facilitate electronic funds transfers (EFTs) for all payments “as soon as practicable.”1 The goal is to reduce fraud risks, as well as lower costs and inefficiencies. The order, however, includes exceptions for individuals who don’t have access to banking services or electronic payment systems.

“Corporations are processing fewer checks, opting instead for faster and more efficient payment methods like Automated Clearing House (ACH) transactions and integrated payables. This initiative is an opportunity for government to modernize payables and receivables, and to secure some of the same benefits businesses have long realized,” says Senior Director of Government Banking Lee Ann Kirwin.

Issuing paper checks costs taxpayers more than half a billion dollars.

The federal government has slowly moved toward electronic payments for many years. While approximately 97% of federal payments are now electronic, the U.S. Treasury still issues 45 million paper checks every year.2,3

Paper checks create an enormous financial burden for the federal government and, subsequently, taxpayers. In 2023, the Treasury estimated a cost of 43 cents to issue a paper check, versus two cents for an EFT.4 In 2024, it cost U.S. taxpayers more than $657 million to maintain the physical infrastructure and specialized technology required to digitize paper checks.5

Paper checks are also a significant expense to businesses and organizations, with an average issuance cost of $4-$20 per item.6 This expenditure is in stark contrast to digital transactions which cost them about 30 cents.7

Paper checks are increasingly associated with rising fraud risks.

Though paper check usage is declining, related fraud is continuing to increase — mostly through mail and deposit theft. From 2021-2023, check fraud nearly doubled according to the FBI and U.S. Postal Inspection Service.8 The US Treasury’s Financial Crimes Enforcement Network (FinCEN) received more than 15,400 reports of mail-theft related check fraud from more than 840 financial institutions over just seven months in 2023. The result was about $688 million in suspicious activity.9 And while drop boxes and vaults are secure, they still pose safety concerns for those who drop off or store cash and checks.

Treasury checks are 16 times more likely to be altered, returned undeliverable or reported lost or stolen.10 This not only costs the Treasury, but is also harmful to individuals and organizations relying on these checks for funding.

Digital payments save time and increase satisfaction.

Faster access to funding is beneficial to government agencies, as paper checks may take more than a week to receive, process, deposit and clear. Adopting integrated payables as part of a broader transition to digital payment systems not only modernizes government operations but also aligns agencies with trends in private-sector efficiency and security.

Integrated payments solutions can assist in transitioning from paper to electronic payments while automating routine tasks such as check issuance, and reconciliation which minimizes manual procedures and human error. Government agencies will be able to expediently transfer funds via ACH and other digital payment methods. These transactions would include direct deposits to employee and beneficiary accounts, as well as non-recurring payments.

Expediting the payment cycle is critical for timely program funding. Integrated payables improve cash flow and liquidity, as well as enable better allocation of resources and more effective financial planning.

Your constituents will also appreciate the convenience of faster payment methods. For example, consumers prefer electronic payments because they give them quicker access to funds. In fact, 41% already receive electronic disbursements from corporations and government agencies, including Social Security payments and tax refunds.11

Streamline government transactions with electronic payments.

The Treasury will facilitate direct deposit, debit and credit card payments, digital wallets and electronic payments like ACH to streamline consumer payments. While the executive order’s focus is federal government payments, the clear benefit and expectation is that electronic payments may also become the norm for state and local governments.

“State and local agencies should consider transitioning to electronic payments now,” says Synovus Director of Payments Product Management Laura McGortey. “Migrating to a modern, fully electronic solution will take time. Given the benefits of electronic payments and the downstream impact of the federal government’s pending shift, it’s best to start early.”

The initiative impacts how clients manage receivables, as well as payables. “Adopting electronic payments isn’t solely to eliminate paper. Your organization can also accept digital funds efficiently and securely,” says Synovus Director of Receivables Product Management Tracy Rudolph.

Prepare for a seamless digital payments transition.

Requirements for digital transformation are different for each organization. There are many considerations for government entities that want to expand electronic payments capabilities. These deliberations include how to modernize your infrastructure, addressing cybersecurity and privacy issues, and determining how to manage payments for individuals without online service.

The most practical first step when considering the transition to electronic payments is speaking with people who have already done so or those who have the knowledge and experience to help determine the approach that will work best for your organization.

The journey to integrating a scalable electronic payments solution begins with evaluating your organization’s needs, engaging with experts early in the process and selecting the right tools. Ask fundamental questions that help to plan and prepare for your entity’s transformation.

• Are the organization’s current systems and workflows compatible with available electronic payment solutions? Compatibility ensures a frictionless integration process, minimizing disruptions to operations and services. For government entities, where efficiency, accountability, and timely funds disbursement are critical, assessing existing systems against modern solutions helps identify gaps and opportunities for improvement. In doing so, agencies can better align their operations with evolving technological standards, ensuring they meet both constituent expectations for faster, more secure payments and the broader objectives of modernization and cost-effectiveness.
  
  
• What are current procedures to manage cybersecurity and privacy? Will the prospective solution offer these features? You’ll protect sensitive financial data and secure transactions against potential threats like data breaches. In addition, any organization that processes, stores or transmits card data is subject to PCI compliance.
  
  
• What options are available for constituents who don’t have digital access? It’s important to maintain inclusivity and ensure equitable access to financial services for all constituents, including those without digital infrastructure. Your organization will also bridge the technological divide, enhance trust among underserved communities, and fulfill the goal of providing timely and secure financial support.
  
  
• Does my financial institution offer a comprehensive suite of payment tools? Can they help with planning and implementation? Partnering with your financial institution adds an essential layer of expertise and support. Financial institutions can offer custom-tailored solutions that align with your agency’s financial objectives, including payment processing, treasury management, regulatory compliance and fraud prevention.

Get the cost-effective solutions your agency needs.

Synovus can help your organization simplify accounts payable and receivable with electronic payment solutions that reduce costs, combat fraud and improve efficiency. To learn more about transitioning to electronic payments and other treasury management solutions, speak with your Relationship Manager or contact Synovus Government Banking Solutions.