Joint Letter to the Board on the RFI re: the Future of Federal Reserve Banks’ Check Services

Dear Mr. McDonough:

The American Bankers Association (ABA) and the Consumer Bankers Association (CBA), appreciate the opportunity to comment on the Federal Reserve's Request for Information (RFI) regarding Check Services. We recognize the critical role checks have historically played in U.S. commerce; however, the environment has changed dramatically. Check volumes have declined steadily for more than two decades, while the cost of processing paper checks and the incidence of check fraud have risen sharply. Absent intervention, fixed processing costs will increasingly be absorbed by a shrinking volume of check transactions, resulting in materially higher per‑item costs. This trajectory is not sustainable over the long term. These trends underscore the need for a deliberate, industry‑wide transition toward faster, safer, and more efficient payment alternatives. This transition will be a substantial undertaking. It is further complicated by the fact that billions of paper check transactions are still processed annually and continue to provide essential benefits to many users. These services must therefore be maintained as consumers, small businesses, and corporate clients transition completely to secure electronic payment methods.

As noted in the RFI, continuing to offer the same level of check services is increasingly challenging because costs are largely fixed while transaction volumes continue to decline. The RFI outlines four broad strategic options: (1) continue providing the same level of service without significant infrastructure investment, which would likely result in degraded reliability and increased outage risk; (2) simplify the scope of Reserve Bank check services to reduce costs, potentially at the expense of service levels; (3) substantially wind down Reserve Bank check services; or (4) upgrade Reserve Bank infrastructure at significant cost, which would be passed through to depository institutions pursuant to the Monetary Control Act of 1980. In practice, a combination of these strategies may yield the most balanced outcome. Continuing operations without infrastructure investment while maintaining current service levels would result in an unreliable payment rail, which would be unacceptable. Conversely, there is limited industry appetite for making substantial investments to support a slow, and fraud‑prone payment instrument.

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