Most people have begun to accept electronic payments as a fast, convenient and—most important—secure form of payment. But a hardcore segment of the population remains unconvinced.

Seeking answers as to why the paper-loyalists are reluctant to change, the St. Louis Fed, on behalf of the FMS, formally surveyed federal benefit check recipients in 2004. On one hand, it’s impressive that 78 percent of federal benefit recipients received their payments electronically via direct deposit in 2003. And while this figure easily beats the 1996 rate of 56 percent, the conversion rate has slowed in recent years to less than 1 percent a year. The 22 percent that the Treasury and the Fed are trying to bring into the fold receive about 170 million checks per year from the government.

In the survey, information from more than 4,000 people who receive federal benefit payments was collected to better understand why some have not signed up for direct deposit.¹ The survey showed that the barriers to direct deposit can be grouped into four general categories:

With baby boomers preparing to retire in droves over the next decade, the Treasury is examining options for increasing direct deposit participation. From September 2004 to March 2005, the St. Louis Fed, on behalf of the Treasury, conducted a pilot marketing program called “Go Direct” in cities in Illinois, Tennessee and Texas, as well as in Puerto Rico. Go Direct used a combination of community outreach, direct mail and various media channels to bring messages about the benefits of direct deposit using trusted sources in the community.