• The Fed outlined multiple paths for the future of check processing as infrastructure needs grow.
• Digital payments are rising even as check fraud increases and volumes decline.
• Vice Chair Michelle Bowman raised concerns that the review could underestimate consumers and businesses that still rely on checks.

The Federal Reserve Board on Thursday requested public comment on potential strategic changes to the check services offered by the Federal Reserve Banks, citing falling check use, rising fraud and the significant investments required to maintain existing operations. The board will accept comments for 90 days after publication of the request in the Federal Register.

Infrastructure Costs 

Reserve Banks currently provide check collection and processing services to banks and credit unions for a fee. The Fed noted that while digital payment alternatives have grown quickly, check volumes continue to decline even as fraud incidents trend higher. To maintain current reliability, Reserve Banks would need substantial infrastructure upgrades, forcing the central bank to consider several future paths.

Those options include forgoing investment in aging check systems, which would lower long-run operational demands but reduce reliability, investing in new infrastructure to preserve or enhance service levels at higher cost, or significantly reducing or winding down check services altogether to limit expenses.

The board said the input it is seeking is preliminary, and any strategy with major long-term implications for the payments system would undergo an additional round of public comment before adoption.

Internal Dissent On Direction of Review

Fed Vice Chair for Supervision Michelle Bowman dissented from issuing the request for information, saying that the proposal appears tilted toward discontinuing check services despite their continued importance to many consumers and businesses. 

“I cannot support the Request for Information and Comment on the Future of the Federal Reserve Banks' Check Services,” she said, adding that the RFI“seems to favor the discontinuation of check services by reserve banks, even while checks remain an important payment mechanism.”

Stocktwits Signals Caution In Market ETFs

On Stocktwits, retail sentiment for the S & P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) was 'bearish', while sentiment for the Dow Jones Industrial Average ETF (DIA) was 'neutral'; all three saw 'normal' message volume.

So far this year, SPY is up 18%, QQQ has gained 22%, and DIA is up 14%.

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