Modernizing Federal Payments: What the New Executive Order Means for Americans

On March 25, 2025, President Donald J. Trump signed an executive order titled “Modernizing Payments To and From America’s Bank Account”, which aims to phase out paper-based financial transactions across the federal government. This move signals a significant shift in how the federal government disburses and collects funds—from tax refunds and Social Security benefits to vendor payments and fines.

Why This Matters

The federal government processes trillions of dollars in payments annually. While electronic payments have become the norm in the private sector, the government still issues a significant number of paper checks and money orders. According to the executive order, these outdated methods increase the risk of fraud, theft, and delays—and cost taxpayers over $657 million in 2024 alone.

To address these concerns, the order mandates a transition to electronic funds transfers (EFTs) for nearly all government payments and receipts, starting September 30, 2025.

Key Objectives of the Executive Order

1. Increase Security and Reduce Fraud

Mail theft and check fraud have been rising, particularly since the COVID-19 pandemic. The Treasury reports that paper checks are 16 times more likely to be lost, stolen, or tampered with compared to EFTs.

2. Enhance Efficiency and Reduce Costs

Digitizing payments aims to streamline government operations and save hundreds of millions annually in processing and infrastructure costs associated with paper checks and physical lockbox services.

3. Improve Convenience for Americans

By promoting digital options—like direct deposit, prepaid cards, digital wallets, and real-time payment systems—the government intends to make transactions faster and more convenient for recipients.

What's Changing?

Effective September 30, 2025, the federal government will:

• Stop issuing paper checks for federal disbursements (benefits, refunds, vendor payments, etc.).

• Require all federal agencies to use electronic methods for payments and collections.

• Digitize receipts to the government, including fines, fees, taxes, and loan payments.

  
  

The Treasury will support agencies in this transition by expanding access to various digital payment options and eliminating reliance on paper-based lockbox services.

Who’s Affected?

This order applies broadly to:

• Federal benefits recipients, including Social Security, veterans’ benefits, and tax refunds.

• Federal contractors and vendors who receive payments from the government.

• Businesses and individuals who make payments to the government.

• Federal agencies tasked with implementing and maintaining financial systems.

  
  

Exceptions and Accommodations

The order allows limited exceptions, such as:

• Individuals without access to banking or digital payment systems.

• Certain emergency situations where digital payments are impractical.

• National security or law enforcement-related transactions.

• Other circumstances as determined by the Treasury Department.

  
  

For those qualifying under these exceptions, alternative payment options will be made available.

Implementation and Public Awareness

The order directs the Department of the Treasury and all federal agencies to:

• Launch a nationwide public awareness campaign to educate payment recipients on the transition.

• Coordinate with financial institutions and consumer groups to improve financial access, particularly for unbanked and underbanked populations.

• Ensure data privacy and security, especially concerning classified or personally identifiable information.

  
  

Agencies are also required to submit compliance plans within 90 days and the Treasury must report on progress to the President within 180 days.

What It Does Not Do

It is important to note that this order:

• Does not establish a Central Bank Digital Currency (CBDC).

• Does not override existing laws that provide for paper payments in certain circumstances.

• Does not create legal rights enforceable by private individuals.

  
  

Looking Ahead

This executive order marks a significant modernization of federal financial infrastructure. By reducing reliance on paper, the government hopes to cut costs, prevent fraud, and improve service delivery to Americans.

As implementation moves forward, individuals and organizations receiving federal payments should expect communication from relevant agencies about how to update their payment preferences and ensure a smooth transition to digital methods.

Stay Informed:

• If you receive payments from the federal government, contact your agency or check their website for updates.

• For questions about financial access or digital payment setup, resources will be made available as part of the upcoming public awareness campaign.

  
  

Sources:

• Executive Order: Modernizing Payments To and From America’s Bank Account

• U.S. Department of the Treasury

• Office of Management and Budget (OMB)

The information provided in this blog post is intended for general informational purposes only and should not be construed as legal or tax advice. While every effort has been made to ensure the accuracy of the information, tax laws and regulations are subject to change, and individual circumstances may vary. For personalized advice and to ensure compliance with current tax laws, it is strongly recommended that you consult with a qualified tax professional, financial advisor, or legal counsel. The author and publisher of this blog assume no responsibility for any errors or omissions, or for any actions taken based on the information contained herein.