No one likes waiting for a check to arrive in the mail. Today’s consumers are accustomed to instant, digital experiences, and those expectations extend to payments. Whether they’re receiving a refund, reimbursement, or settlement, recipients expect fast, secure and flexible options.
That shift is prompting organizations to rethink how they disburse funds, with prepaid cards emerging as a practical option for many use cases. By giving payees more direct ways to receive their money, organizations can reduce reliance on paper checks while improving access to funds for recipients.
In a PaymentsJournal Podcast, U.S. Bank’s Ashley Downey, Treasury and Payment Solutions Senior Product Manager and Kristin Ridgway, Prepaid Payment Solutions Consultant, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed how modern payment hubs can help organizations reduce costs, improve security, and provide recipients with greater choice. By moving payments away from paper checks and toward prepaid cards, payors can simplify disbursements while improving the payment experience.
Moving Away from Checks
Despite the continued shift toward digital payments, many companies still reflexively turn to paper checks for disbursements. Paper checks remain an expensive and inefficient payment method. The cost per check can exceed $4, with some estimates reaching as high as $20.
“Think about all that goes into printing checks—the postage, labor, manual approvals, stuffing envelopes, tracking lost mail,” said Ridgway. “Probably the most time-consuming and expensive is check fraud. As they move those payments to prepaid cards or other pay methods, all those issues are eliminated, especially the fraud.”
Checks have become less convenient for payees as well. Consumers expect speed and convenience in nearly every aspect of their lives, making a trip to the mailbox and a stop at a check-cashing location feel outdated—especially when additional fees may be involved.
Fortunately, organizations have a growing range of alternatives to paper checks, including prepaid cards, payroll cards, digital payments, and even peer-to-peer services like Zelle.
“All of these things are part of the arsenal every recipient uses, and they need to get those funds where they need it and as quickly as they can,” said Downey. “Having that access is key to consumers’ ability to take hold of their own personal finances.”
The Benefits of Prepaid
For recipients who may not have a traditional bank account—or simply want immediate access to their funds—prepaid cards can offer a practical alternative to paper checks.
“Why do people use prepaid cards for themselves?” said Hirschfield. “People feel like it’s a safer option versus checks or cash. But it also turns immediately into the ability to access the money. It’s much easier to use a card on an open loop rail, especially when you’re under banked, when you have poor credit and don’t qualify for a credit card.”
There’s also compliance consideration. Uncashed checks must be tracked, reported, and remitted to the state, creating additional administrative burden and audit exposure.
“When a payment is made to a prepaid card, we handle statement responsibility according to the state where the recipient resides,” said Ridgway. “We take that burden away from our clients when the payment is made to a prepaid card.”
A Focus on Flexibility
In most cases, payee preferences and payment use cases help determine the optimal payment method. What U.S. Bank has found works well for its clients is conducting an assessment of who they’re paying and why they’re making those payments.
There may be situations where funds are urgently needed, such as providing food or services to victims of a natural disaster. Or a business might have a vendor on-site who needs payment in hand before leaving. The ways those individuals prefer to receive payment could be very different—and critical to their missions. Increasingly, customers are demanding not just faster payment methods but also more payment options.
The challenge for many organizations is that they may not be prepared for that level of complexity. One emerging solution is a single disbursement platform connected to multiple services and tools, such as U.S. Bank’s Payee Choice. A decision engine can process each payment and determine the ideal outcome for both the payor and the recipient.
“We simplify the process so the end recipient doesn’t have to fully know or understand all the options available to them,” said Downey. “We use what information we receive from the client to best identify what solutions or payment methods best fit that recipient.
“A good example of that is Zelle,” she said. “We can identify if a person is already enrolled in the Zelle network using the aliases provided by the client. And we can suppress showing that option to individuals who aren’t already enrolled. If they are enrolled in Zelle, click this button, you’ll get the payment in minutes. That’s just a better experience.”
Protection from Fraud
As organizations evaluate their payment mix, security has become just as important as efficiency and consumer preference. Fraud continues to be a major concern in the payments space, with paper checks remaining a primary target for criminals. Providing alternative payment options can help reduce that exposure while giving recipients greater choice.
“Any type of electronic and card payment gives a much deeper programmatic fraud management solution,” said Hirschfield. “There are many more steps needed to protect these programs.”
Having multiple layers of fraud prevention built into the process minimizes the need for organizations to collect and store sensitive data, thereby reducing their exposure and risk. Payee Choice continuously monitors for fraudulent activity.
“We’re validating that person is the rightful owner of the account that’s being linked for payment for ACH or an instant payment, for example,” said Downey. “For Zelle, we can do a name match as well. And we’re making sure we’re preventing any misguided payments.”
Final Thoughts
Paper checks are becoming increasingly disconnected from how recipients actually want to be paid today—particularly among younger consumers who have never used them.
“We live in this digitally-native society—especially younger generations,” said Hirschfield. “Having these options to have any kind of digital payment or electronic payment is critical.”
Offering payment choice helps close that gap, reducing friction for recipients and operational complexity for organizations.
“It’s been really powerful to have our customers move away from issuing checks and manual processes to be freed up to work on other things at their business,” said Downey. “Helping those clients move from just thinking about a payment solution and being able to drive overall improvement for them has been really successful.”
