In a letter today to the Treasury Department, the American Bankers Association expressed support efforts to increase the efficiency of the payment system while also improving security and providing an enhanced service to the public.
The letter, written in response to the agency’s request for information regarding modernizing payments to and from the U.S. government, outlines recommendations to help Treasury reach its deadline to transition all federal payments that are currently made by paper check — including Social Security benefits, tax refunds and vendor payments — to be made electronically by Sept. 20.
“We strongly support the effort to increase the efficiency of the payment system while at the same time improving its security and providing an enhanced service to the public,” ABA wrote. “Removing the paper check from the payment system will result in a cheaper, faster, and more secure payment system.”
To help the agency reach its goal, ABA recommended increasing the number of consumers and businesses with bank accounts capable of receiving electronic payments as well as the number of consumers and businesses with bank accounts that migrate to faster, safer and cheaper electronic payments instead of paper checks. ABA also suggested concentrating initial efforts on the payment flows with the largest volume of paper checks.
ABA explained that one of the barriers preventing many payees from receiving electronic payments is the lack of a bank account and made several detailed recommendations to promote Bank On accounts, which are safe, low-cost accounts that enable individuals to enter the financial system and get paid more efficiently and to make use of conventional products such as debit cards.
ABA recommended that Treasury promote Bank On-certified accounts to new recipients of federal payments who do not have a bank account as well as current recipients of paper checks. “Individuals without bank accounts would be able to review the list of nearly 500 available Bank On account providers with the knowledge that the accounts are certified to be safe and low-cost,” ABA wrote.
ABA also suggested that recognizing that some programs will be more difficult to convert to electronic payment than others. For these types of programs, it will be more important to solve the challenge of ensuring data integrity first before forcing an electronic payment into the mix.
The association also recommended setting a reasonable deadline for businesses receiving payment set a reasonable deadline to migrate toward electronic payments; improving the Pay.gov site by including all of the federal government’s incoming payments flows, standardizing the payment types accepted, and removing any impediments to an electronic payment including fees; and being aware that scammers will be following this effort and will attempt to impersonate payment recipients or even the federal government with the intent to defraud payment recipients.
