March 27, 2025 • 12 mins
In the wake of this week’s significant executive order directing the Treasury to eliminate the use of paper checks for federal government disbursements (and payments to the U.S. government), ABA’s Steve Kenneally joins the podcast for a conversation on what’s next for the payments system. In this episode — sponsored by nCino — Kenneally discusses:
- The role of Treasury checks in check fraud schemes.
- The order’s aggressive timeline, with an implementation date of Sept. 30, 2025.
- The significant challenges faced by different federal agencies in phasing out paper payments.
- The potential scope of exceptions to the order.
- How banks can help the small remaining user base of Treasury checks switch into bank accounts, including Bank On-certified accounts.
- Read our ABA Banking Journal feature on “Is it time to kill the paper check?“
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Steve Kenneally (00:04):
You should probably be training your tellers
to recognize treasury checks.
If people come in and are depositingthem every month tell them that they
need to be ready to shift to EFT.
And if they're at your bank you canhelp explain to them how to find
their routing number and accountnumber that they're gonna need to
provide to the, the federal agency.
Evan Sparks (00:24):
From the American Bankers Association, this is
the ABA Banking Journal podcast.
Welcome back.
I'm Evan Sparks.
Today's episode is presentedby nCino and I am joined by my
ABA colleague Steve Kenneally.
Steve is senior vice President forpayments policy here at ABA and
an expert on all things payments.
And so Steve, welcome to the show.
Thanks for having me.
So we're here to talk, to talk alittle bit about something, some
(00:46):
big news that came out this week.
And that was an executiveorder from President Trump.
There are a whole lot of these,and you can find ABAs analysis
of all of the executive orderson our website at aba.com, there
are staff analysis for all these.
This one was a big one because itdirects the treasury to stop issuing
paper checks for disbursements.
(01:08):
And that includes tax refunds, vendorpayments, benefit payments, transfers
between government agencies andbasically as soon as practical and
to the full extent permitted by law.
So that's a huge shift.
And it has a lot of implicationsfor banks, for the payment system,
for banks' efforts to prevent fraud.
And so I'm really glad to haveSteve on to help banks break down
(01:29):
what this means in the near term.
So, Steve, thanks so much for,for being on to talk about it.
Steve Kenneally (01:34):
Thanks Evan.
It actually goes even further than that.
It's not just federal governmentdisbursements, but it's payments
to the federal government.
Yeah, they wanna, they wannaeliminate the receiving of checks
to make themselves more efficient.
'cause even when you.
Put a check in the mail and sendit, and it gets processed correctly.
There's no fraud.
It doesn't get stolen.
(01:54):
It's still an expensive way to paysomebody someone's gonna hold it.
Gotta process it, gottatake an image of it.
It's, it's a labor intensivesort of payment as opposed
to a electronic payment.
Evan Sparks (02:06):
I will say as somebody who only in the last couple years got
on the board, the like direct paymenttrain, I, you know, I kind of liked
having the option when I was doing myestimated tax payments to, getting that
check right in at the, at the postmarkdate, you know, and then it takes a
little time for it to get processed.
But obviously running thesebig facilities for the IRS to
receive payments is a a is a bear.
(02:28):
And then the, the governmenttakes and all kinds of payments
beyond just payments to the IRS.
Steve Kenneally (02:33):
Yeah, and you should be able to still manage the
timing of the payment with an EFT.
You know, if you need to pay byApril 15th, you pick April 15th.
This is the payment date.
Evan Sparks (02:42):
One of the challenges I know that banks have experienced
is fraud around the use of treasurychecks and fake checks that are being
purported to be a treasury check.
And we have the treasurycheck verification service.
But to what extent is that, doyou think this is going to affect
banks exposure to check fraud?
Steve Kenneally (02:58):
Well, when it gets fully implemented, it's definitely going to
shrink One of the threat vectors there.
'cause I mean, even the Secret Servicehad came out with a recommendation a
couple of years ago saying, when it comesto treasury checks, don't open a new
account with a treasury check and don'taccept a treasury check for deposit for
an account that's less than a year old.
Hmm.
Because they recognize that bankstreat treasury checks differently
(03:22):
and really they shouldn't.
And the fraudsters know that bankstreat treasury checks differently,
and that's why they, you know, changedthe name or altered the amount or just
to create a totally fraudulent check.
Evan Sparks (03:34):
It was interesting being the conversations we had a couple weeks
ago here at ABA at our check fraudsymposium where, you know, hearing some
of the interest in in perhaps seeking,you know, a legislative remedy that
would cap the size of a treasury check.
Right?
But I mean, if this is, if thisgoes into place that sort of.
Mitigates that entirely if you, if thetreasury says, well, we're just, we're
(03:57):
just really not doing 'em anymore.
Steve Kenneally (03:59):
Yeah, that, that would be fantastic.
I mean, this goes beyond whatwe were considering asking for.
And really it gives like new moreoomph to a treasury requirement
that's been in place for.
More than 25 years.
There was the EFT 99 law that waspassed that required treasury to
make all electronic payments by 1999.
(04:21):
Obviously, they, they missed that, butthey've really, they've done everything.
They've got a hundred percentof the salary payments or
EFT 99% of social security.
97% of VA and 97% of IRS tax refunds.
So you could honestly say they'vedone all the The easy part.
Evan Sparks (04:41):
Yeah.
Steve Kenneally (04:41):
But it's those last few percentage of recipients that we're
really gonna have to, to work to maybeeither provide them a bank account.
Or a, a treasury issued debit cards.
Receive a payment electronically.
Evan Sparks (04:54):
Yeah.
And that, that was what, you know, that'sone of the questions I had looking at
this at, at this executive order isthe exceptions that are embedded in it.
Because there are exceptions foryou know, people without banking or
electronic payments, access certainemergency payments, special cases,
you know, like law enforcementactivities where, you know, obviously.
There may be there maybe some issues there.
(05:15):
And, you know, what, what, where doyou, I mean, we don't know what all
those, how those, all those exceptionsare gonna be interpreted yet.
But if you're looking at this, whatdoes the, what is the role of exceptions
perhaps in driving the persistence ofthe of treasury checks down the road
once this order is fully implemented?
Steve Kenneally (05:36):
Yeah, well, well, full disclosure, I worked at
Treasury during the EFT 99 campaign.
That was not as successfulas it should have been.
But a lot of the, the reports that wehad were mostly from individual social
security recipients who basically wouldsay, you know, I've received a check
for 40 years and I'm not gonna stop now.
And they would call the congressman.
(05:56):
Congressman would call treasury andsay, don't stop that person's check.
So there was, and and Treasury said, okay.
'cause they were, they were converting,they were going up from 50% to 90%.
So what was the big dealwith just one or two?
And while those one or two were,when you put add 'em in the aggregate
turn out to be a really big numberof paper checks that are still being.
(06:16):
Issued.
So it all comes down to what's, whatis the latitude that the administration
will give to people that plead hardship?
Will they be will they be, you know,on a scale of one to 10, will they
be accepting of those pleas or willthey say, I understand, but we're
still gonna give you a debit card.
So a a lot of it comes down tosome discretion on those smaller
(06:38):
amounts on those smaller, youknow, consumer payment types.
Evan Sparks (06:42):
Yeah.
I wanna take a quick moment here tothank our sponsor for this episode.
Today's financial institutionsstrive to achieve efficiency, which
obviously we're talking about thattoday, boost customer satisfaction
and and adapt to changing markets.
nCino provides tools todigitize processes, consolidate
systems, and drive innovation.
With over 1,800 institutions alreadybenefiting from their platform, nCino is
(07:03):
powering a new era in financial services.
You can learn more about taking the nextstep towards solving your institution's
challenges with ncino at nCino.com.
That's in CN o.com.
And thanks again to nCinofor sponsoring this episode.
So coming back to the executive orderhere there's a six month timeline for
this to be implemented September 30th.
(07:25):
Obviously 25 years after EFT 99,what are your thoughts on the six
month timeframe and how reasonableit is and whether banks are gonna
to, what, what banks need to knowabout gearing up for that timeline?
Steve Kenneally (07:39):
Well, that is a very aggressive timeframe.
I mean, six months to do anythingin the federal government
is an aggressive timeframe.
But I think that the banksthere's a ABA can help the banks
communicate with their customersthat are receiving treasury checks.
You should probably be training yourtellers to recognize treasury checks.
If people come in and are depositingthem every month tell them that they
(08:02):
need to be ready to shift to EFT.
And if they're at your bank you canhelp explain to them how to find
their routing number and accountnumber that they're gonna need to
provide to the, the federal agency.
The, the other side of the coin hereis that the incoming checks, the
federal government they're going toneed to do a lot of work internally.
(08:25):
Say for instance, you're renewing yourpassport and so you would attach your
check to your old passport mm-hmm.
And your new picture.
In order for that payment to be madeelectronically, it's gonna be a lot
more complex because you would needto somehow associate the electronic
payment that you send to them,however they direct you to do it.
With the hard copy of the, the paperpassport and they need to make that
(08:48):
connection and that's gonna be abigger challenge for for them to.
Accomplish, especially in just six months.
Yeah,
Evan Sparks (08:56):
we are, we are renewing a couple kids' passports this spring
and and I have, so I have refreshedmy, my sense of the guidelines and I
am always amazed that it still requiresactually a paper check or a money
order or something like that insteadof some kind of electronic payment.
Yeah.
For that, for that
Steve Kenneally (09:12):
process.
Yeah.
So it's gonna be a big change.
And but the, the federal governments they.
They're actually in the midst ofRebidding their lockbox network, which
is what they call the, the banks thatmanage these incoming payment streams.
And the numbers aren'tthat big, surprisingly.
They, they processed an incoming 15million checks last year, which really is
a pretty small number considering the, thetotal number of checks that was issued.
(09:37):
In 2021.
The last day we have, last yearwe have data was about 11 billion.
So, I mean, 15 million is a reallysmall percentage of 11 billion.
So again, they've done the easy part.
It's the hard part that they needto do now on the incoming payments.
Evan Sparks (09:54):
You know, one of the things that we talked about, we put ABA
put out a statement from Rob Nichols.
We talked about how, you know, what we,all the things that ABAnks have already
done to move a lot of customers onto youknow, in into payment accounts, the EFT
capable accounts, and you know, we'vegot the unbanked rate down to 4% here.
You know, what, what else canbanks do to continue supporting
(10:15):
the migration of customers into.
In the bank accounts and, and,and minimizing the use of the, the
need minimizing any need for anexception on these treasury checks.
Steve Kenneally (10:26):
Well, I think we're gonna have to look at the
people that aren't bank customers.
Now, those that don't have bankaccounts if you don't have ABAnk
account, you're not receivingyour, your payment electronically.
So that's the first step is to get them.
On board there.
We do a lot of work with the bank onprogram that offers, you know, sort of a,
ABAsic transaction account at a low cost.
(10:47):
I think that more banks shouldbe considering offering those
to, to customers that don'thave bank accounts currently.
That's, you know, gettingtheir foot in the door of the
banking, of the banking industry.
And really it's better for the recipient.
I mean.
Electronic payments are safer, faster,and cheaper to use than, you know,
waiting for a paper check to come inthe mail, hoping it doesn't get stolen,
(11:10):
and then taking it to a check cashierand paying $10 to cash your check.
I mean, that's, that's, that'sa horrible way to get paid.
I. Yeah, absolutely.
Evan Sparks (11:18):
Well Steve, this has been a, this has been great, helpful conversation.
I know this is something that bankersare gonna need to be focused on both on
the, on the fraud front teller educationand on the payment strategy front.
So thank you so much for sharingyour insights with us today.
Great.
Thank you very much.
All right.
And for our listeners, Steve is actuallyabout to head out and head out to
(11:39):
opening day at the at the Nats Park.
So go Nats and and, and let's play ball.
Thanks for thanks to nCinofor sponsoring this episode.
If you wanna find more episodesin the podcast series, just go to
aba.com/banking journal podcast.
Steve mentioned the Bank on Program.
You can learn more about that ataba.com/join bank on, lots of great
resources to to help you reaching thislast mile problem in efficient payments.
(12:01):
So have a great day and we'll beback with you again very soon.
You should probably be training your tellers
to recognize treasury checks.
If people come in and are depositingthem every month tell them that they
need to be ready to shift to EFT.
And if they're at your bank you canhelp explain to them how to find
their routing number and accountnumber that they're gonna need to
provide to the, the federal agency.
Evan Sparks (00:24):
From the American Bankers Association, this is
the ABA Banking Journal podcast.
Welcome back.
I'm Evan Sparks.
Today's episode is presentedby nCino and I am joined by my
ABA colleague Steve Kenneally.
Steve is senior vice President forpayments policy here at ABA and
an expert on all things payments.
And so Steve, welcome to the show.
Thanks for having me.
So we're here to talk, to talk alittle bit about something, some
(00:46):
big news that came out this week.
And that was an executiveorder from President Trump.
There are a whole lot of these,and you can find ABAs analysis
of all of the executive orderson our website at aba.com, there
are staff analysis for all these.
This one was a big one because itdirects the treasury to stop issuing
paper checks for disbursements.
(01:08):
And that includes tax refunds, vendorpayments, benefit payments, transfers
between government agencies andbasically as soon as practical and
to the full extent permitted by law.
So that's a huge shift.
And it has a lot of implicationsfor banks, for the payment system,
for banks' efforts to prevent fraud.
And so I'm really glad to haveSteve on to help banks break down
(01:29):
what this means in the near term.
So, Steve, thanks so much for,for being on to talk about it.
Steve Kenneally (01:34):
Thanks Evan.
It actually goes even further than that.
It's not just federal governmentdisbursements, but it's payments
to the federal government.
Yeah, they wanna, they wannaeliminate the receiving of checks
to make themselves more efficient.
'cause even when you.
Put a check in the mail and sendit, and it gets processed correctly.
There's no fraud.
It doesn't get stolen.
(01:54):
It's still an expensive way to paysomebody someone's gonna hold it.
Gotta process it, gottatake an image of it.
It's, it's a labor intensivesort of payment as opposed
to a electronic payment.
Evan Sparks (02:06):
I will say as somebody who only in the last couple years got
on the board, the like direct paymenttrain, I, you know, I kind of liked
having the option when I was doing myestimated tax payments to, getting that
check right in at the, at the postmarkdate, you know, and then it takes a
little time for it to get processed.
But obviously running thesebig facilities for the IRS to
receive payments is a a is a bear.
(02:28):
And then the, the governmenttakes and all kinds of payments
beyond just payments to the IRS.
Steve Kenneally (02:33):
Yeah, and you should be able to still manage the
timing of the payment with an EFT.
You know, if you need to pay byApril 15th, you pick April 15th.
This is the payment date.
Evan Sparks (02:42):
One of the challenges I know that banks have experienced
is fraud around the use of treasurychecks and fake checks that are being
purported to be a treasury check.
And we have the treasurycheck verification service.
But to what extent is that, doyou think this is going to affect
banks exposure to check fraud?
Steve Kenneally (02:58):
Well, when it gets fully implemented, it's definitely going to
shrink One of the threat vectors there.
'cause I mean, even the Secret Servicehad came out with a recommendation a
couple of years ago saying, when it comesto treasury checks, don't open a new
account with a treasury check and don'taccept a treasury check for deposit for
an account that's less than a year old.
Hmm.
Because they recognize that bankstreat treasury checks differently
(03:22):
and really they shouldn't.
And the fraudsters know that bankstreat treasury checks differently,
and that's why they, you know, changedthe name or altered the amount or just
to create a totally fraudulent check.
Evan Sparks (03:34):
It was interesting being the conversations we had a couple weeks
ago here at ABA at our check fraudsymposium where, you know, hearing some
of the interest in in perhaps seeking,you know, a legislative remedy that
would cap the size of a treasury check.
Right?
But I mean, if this is, if thisgoes into place that sort of.
Mitigates that entirely if you, if thetreasury says, well, we're just, we're
(03:57):
just really not doing 'em anymore.
Steve Kenneally (03:59):
Yeah, that, that would be fantastic.
I mean, this goes beyond whatwe were considering asking for.
And really it gives like new moreoomph to a treasury requirement
that's been in place for.
More than 25 years.
There was the EFT 99 law that waspassed that required treasury to
make all electronic payments by 1999.
(04:21):
Obviously, they, they missed that, butthey've really, they've done everything.
They've got a hundred percentof the salary payments or
EFT 99% of social security.
97% of VA and 97% of IRS tax refunds.
So you could honestly say they'vedone all the The easy part.
Evan Sparks (04:41):
Yeah.
Steve Kenneally (04:41):
But it's those last few percentage of recipients that we're
really gonna have to, to work to maybeeither provide them a bank account.
Or a, a treasury issued debit cards.
Receive a payment electronically.
Evan Sparks (04:54):
Yeah.
And that, that was what, you know, that'sone of the questions I had looking at
this at, at this executive order isthe exceptions that are embedded in it.
Because there are exceptions foryou know, people without banking or
electronic payments, access certainemergency payments, special cases,
you know, like law enforcementactivities where, you know, obviously.
There may be there maybe some issues there.
(05:15):
And, you know, what, what, where doyou, I mean, we don't know what all
those, how those, all those exceptionsare gonna be interpreted yet.
But if you're looking at this, whatdoes the, what is the role of exceptions
perhaps in driving the persistence ofthe of treasury checks down the road
once this order is fully implemented?
Steve Kenneally (05:36):
Yeah, well, well, full disclosure, I worked at
Treasury during the EFT 99 campaign.
That was not as successfulas it should have been.
But a lot of the, the reports that wehad were mostly from individual social
security recipients who basically wouldsay, you know, I've received a check
for 40 years and I'm not gonna stop now.
And they would call the congressman.
(05:56):
Congressman would call treasury andsay, don't stop that person's check.
So there was, and and Treasury said, okay.
'cause they were, they were converting,they were going up from 50% to 90%.
So what was the big dealwith just one or two?
And while those one or two were,when you put add 'em in the aggregate
turn out to be a really big numberof paper checks that are still being.
(06:16):
Issued.
So it all comes down to what's, whatis the latitude that the administration
will give to people that plead hardship?
Will they be will they be, you know,on a scale of one to 10, will they
be accepting of those pleas or willthey say, I understand, but we're
still gonna give you a debit card.
So a a lot of it comes down tosome discretion on those smaller
(06:38):
amounts on those smaller, youknow, consumer payment types.
Evan Sparks (06:42):
Yeah.
I wanna take a quick moment here tothank our sponsor for this episode.
Today's financial institutionsstrive to achieve efficiency, which
obviously we're talking about thattoday, boost customer satisfaction
and and adapt to changing markets.
nCino provides tools todigitize processes, consolidate
systems, and drive innovation.
With over 1,800 institutions alreadybenefiting from their platform, nCino is
(07:03):
powering a new era in financial services.
You can learn more about taking the nextstep towards solving your institution's
challenges with ncino at nCino.com.
That's in CN o.com.
And thanks again to nCinofor sponsoring this episode.
So coming back to the executive orderhere there's a six month timeline for
this to be implemented September 30th.
(07:25):
Obviously 25 years after EFT 99,what are your thoughts on the six
month timeframe and how reasonableit is and whether banks are gonna
to, what, what banks need to knowabout gearing up for that timeline?
Steve Kenneally (07:39):
Well, that is a very aggressive timeframe.
I mean, six months to do anythingin the federal government
is an aggressive timeframe.
But I think that the banksthere's a ABA can help the banks
communicate with their customersthat are receiving treasury checks.
You should probably be training yourtellers to recognize treasury checks.
If people come in and are depositingthem every month tell them that they
(08:02):
need to be ready to shift to EFT.
And if they're at your bank you canhelp explain to them how to find
their routing number and accountnumber that they're gonna need to
provide to the, the federal agency.
The, the other side of the coin hereis that the incoming checks, the
federal government they're going toneed to do a lot of work internally.
(08:25):
Say for instance, you're renewing yourpassport and so you would attach your
check to your old passport mm-hmm.
And your new picture.
In order for that payment to be madeelectronically, it's gonna be a lot
more complex because you would needto somehow associate the electronic
payment that you send to them,however they direct you to do it.
With the hard copy of the, the paperpassport and they need to make that
(08:48):
connection and that's gonna be abigger challenge for for them to.
Accomplish, especially in just six months.
Yeah,
Evan Sparks (08:56):
we are, we are renewing a couple kids' passports this spring
and and I have, so I have refreshedmy, my sense of the guidelines and I
am always amazed that it still requiresactually a paper check or a money
order or something like that insteadof some kind of electronic payment.
Yeah.
For that, for that
Steve Kenneally (09:12):
process.
Yeah.
So it's gonna be a big change.
And but the, the federal governments they.
They're actually in the midst ofRebidding their lockbox network, which
is what they call the, the banks thatmanage these incoming payment streams.
And the numbers aren'tthat big, surprisingly.
They, they processed an incoming 15million checks last year, which really is
a pretty small number considering the, thetotal number of checks that was issued.
(09:37):
In 2021.
The last day we have, last yearwe have data was about 11 billion.
So, I mean, 15 million is a reallysmall percentage of 11 billion.
So again, they've done the easy part.
It's the hard part that they needto do now on the incoming payments.
Evan Sparks (09:54):
You know, one of the things that we talked about, we put ABA
put out a statement from Rob Nichols.
We talked about how, you know, what we,all the things that ABAnks have already
done to move a lot of customers onto youknow, in into payment accounts, the EFT
capable accounts, and you know, we'vegot the unbanked rate down to 4% here.
You know, what, what else canbanks do to continue supporting
(10:15):
the migration of customers into.
In the bank accounts and, and,and minimizing the use of the, the
need minimizing any need for anexception on these treasury checks.
Steve Kenneally (10:26):
Well, I think we're gonna have to look at the
people that aren't bank customers.
Now, those that don't have bankaccounts if you don't have ABAnk
account, you're not receivingyour, your payment electronically.
So that's the first step is to get them.
On board there.
We do a lot of work with the bank onprogram that offers, you know, sort of a,
ABAsic transaction account at a low cost.
(10:47):
I think that more banks shouldbe considering offering those
to, to customers that don'thave bank accounts currently.
That's, you know, gettingtheir foot in the door of the
banking, of the banking industry.
And really it's better for the recipient.
I mean.
Electronic payments are safer, faster,and cheaper to use than, you know,
waiting for a paper check to come inthe mail, hoping it doesn't get stolen,
(11:10):
and then taking it to a check cashierand paying $10 to cash your check.
I mean, that's, that's, that'sa horrible way to get paid.
I. Yeah, absolutely.
Evan Sparks (11:18):
Well Steve, this has been a, this has been great, helpful conversation.
I know this is something that bankersare gonna need to be focused on both on
the, on the fraud front teller educationand on the payment strategy front.
So thank you so much for sharingyour insights with us today.
Great.
Thank you very much.
All right.
And for our listeners, Steve is actuallyabout to head out and head out to
(11:39):
opening day at the at the Nats Park.
So go Nats and and, and let's play ball.
Thanks for thanks to nCinofor sponsoring this episode.
If you wanna find more episodesin the podcast series, just go to
aba.com/banking journal podcast.
Steve mentioned the Bank on Program.
You can learn more about that ataba.com/join bank on, lots of great
resources to to help you reaching thislast mile problem in efficient payments.
(12:01):
So have a great day and we'll beback with you again very soon.
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