Insights from Usio on What’s Changing, What’s at Stake, and What Comes Next
The Digital Disbursement Mandate Is Here
Paper checks from the federal government are on their way out. In March 2025, a sweeping executive order was signed requiring that all federal payments must be made electronically by September 30, 2025. That includes everything from IRS refunds and Social Security benefits to vendor payments, disaster aid, and more.
It’s a monumental shift—and it’s happening fast.
The move is grounded in both common sense and cost: paper checks are slow, expensive, and vulnerable. The U.S. Treasury found that checks are 16× more likely to be lost or stolen than electronic transfers. In 2022, banks reported nearly 680,000 check-fraud incidents, double the previous year. And the cost to taxpayers? More than $657 million in 2024 just to print, mail, and manage checks.
At Usio, a company deeply embedded in the payments infrastructure for government, non-profit, and enterprise disbursements, we’ve been tracking this shift closely. We’re not just seeing the trend—we’re advising agencies, partners, and payment teams on how to adapt to it.
What’s Already Changed: Social Security and VA Payments
Many Americans may not realize this transition began years ago. Since 2013, Social Security and VA benefits have been overwhelmingly electronic. Today, about 99% of Social Security recipients already receive direct deposit or debit card payments. Only a small group—often those over 90 years old or facing hardship—still qualify for paper checks.
From a policy standpoint, those systems are already aligned with the 2025 mandate. But from a public education and access standpoint, there’s still work to be done. For instance, the Social Security Administration is currently notifying the remaining 500,000 or so paper-check recipients that they’ll need to switch to electronic methods—or apply for an exemption—by the deadline.
This moment is less about flipping a switch and more about ensuring no one is left behind.
The Bigger Impact: Tax Refunds, IRS Payments, and Vendor Disbursements
The real disruption lies in areas still dependent on paper. The IRS, for example, issued over 5 million refund checks in the 2025 filing season. And an estimated 10% of taxpayers still pay taxes by mailing paper checks.
Under the executive order, that ends in September. All refunds and payments to and from the IRS must be electronic—when legally permissible.
This won’t be a simple software update. For agencies like the IRS, it means large-scale operational changes, revised outreach strategies, and a renewed focus on serving vulnerable populations, including the elderly, rural residents, and unbanked individuals.
At Usio, we’ve advised clients through transitions like these—from state child support systems to federal disaster relief programs. It’s not just about technology—it’s about trust, usability, and inclusion.
What About the Unbanked?
This is one of the most pressing issues in the entire conversation.
Roughly 5.9 million U.S. households remain unbanked, according to the FDIC. In Illinois, it’s about 7% of households. These are often low-income, rural, or elderly Americans who may not have access to traditional banking or reliable internet service.
Without a plan, they risk being excluded from this new system.
Fortunately, there are tested solutions—like reloadable prepaid debit cards that function much like bank accounts. Federal programs like Direct Express® already offer this for Social Security, and many state child support programs do the same.
Usio’s role in this space has always been to provide practical, secure, and accessible disbursement infrastructure, especially for those outside the financial mainstream. We continue to work with partners to ensure digital doesn’t mean exclusion.
Child Support Disbursements: A Case Study in Progress
States have been moving child support payments online for years—often under federal guidance but with unique local challenges. In New Mexico, about 66% of payments are made electronically. In Illinois, it’s roughly 70%.
Yet in a national survey, over half of parents still said they preferred to receive child support by check, money order, or even cash.
That shows a disconnect between policy, technology, and lived experience. At Usio, we believe the success of this broader federal mandate depends on bridging that gap—with education, easy-to-use payment options, and multiple ways to access funds safely and reliably.
What This Means for Agencies and Individuals
If you work in a government agency, finance department, or vendor management team, now is the time to audit your current disbursement and payment acceptance processes. Ask:
- Are we still issuing checks for refunds or reimbursements?
- Do we have a solution for constituents who lack bank accounts?
- Can we process inbound payments electronically with compliance?
If you’re a citizen or beneficiary, now’s the time to ask:
- Am I signed up for direct deposit?
- Do I need a prepaid card solution?
- Have I received a notice from SSA, IRS, or another agency about this change?
Usio’s Role in the Modernization of Government Payments
As digital disbursements move from trend to federal mandate, Usio continues to serve as a resource and infrastructure expert for government and public-sector partners. Our team brings decades of experience in navigating payment transitions, helping agencies digitize both outgoing payments and incoming collections, and supporting populations who need additional access.
We’ve helped design programs that:
- Replace checks with prepaid cards for the unbanked
- Embed real-time payment capabilities into legacy systems
- Reduce fraud and administrative costs by eliminating manual handling
- Integrate payment tracking and compliance tools into workflows
Our approach is simple: meet people where they are—digitally, securely, and inclusively.
Final Thoughts: Don’t Just Go Digital—Go Smart
The 2025 mandate isn’t just about technology. It’s about trust, speed, security, and access. As the paper check era winds down, the goal isn’t just to swap formats—it’s to modernize the system for everyone.
At Usio, we believe digital transformation works best when it includes everyone, not just those with access to the latest tools. And as the public sector steps fully into the digital payments era, we’ll continue to share what we’ve learned, what’s working, and where we still need to go.
For more insights on payments, disbursements, and financial inclusion in the public sector, visit usio.com.
