Maybe it’s time to put the United States Post Office back in the banking business. Until 1967, the USPS offered savings deposit accounts and even now you can get money orders and do international wire transfers.
There’s a push by the Campaign for Postal Banking to get the USPS to provide a banking alternative, particularly for low income and those without bank accounts who depend on payday loans and check cashing places. No doubt, such a change would be significant. A 2013 Federal Deposit Insurance Corporation survey found that nearly 10 million households in 2013 had no one with a bank account. According to the Campaign for Postal Banking, payday loans typically charge an interest rate of 391%.
A world in which the USPS would have savings accounts, bill paying, ATM services among others isn’t revolutionary. According to the Campaign for Postal Banking, 1.5 billion people worldwide access their financial services through a post office.
The notion of the USPS going full scale into banking stirs debate. The experts weigh in.
In an interview with CreditCards.com, Mehrsa Baradaran, a University of Georgia law professor and author of How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy, explains why postal banking is a good idea, "Because we’ve reached a real crisis, as the banks are now bigger and more powerful, which means they have the ability to pull out of rural, depressed, low income and inner city areas. Community banks are dying by the hundreds every year and they won’t be back because they’re after the same profit numbers. The post office is also struggling and reaching out for a lifeline. That’s why now, and why the post office makes sense."
Andreas Lewis, managing director of Ad Hoc UX Research, which has done extensive research looking at the "user experience" of the unbanked populations and how financial services products can work for them, sees many benefits for consumers, "convenience and ubiquity because the USPS is ‘everywhere’ and is easy to access." She says it is also a trusted brand because people have many touch points with the USPS for handling confidential information in their lives. This trust could easily be extended to the provision of financial services. Her opinion aligns with the Campaign for Postal Banking which found that 68% of those they surveyed have confidence in the USPS, compared to 26% in banks.
Another plus, she says would be the pressure placed on banks. "The USPS entering the market may encourage banks to provide competing products, opening the market and giving even better and more competitive services."
While the banking industry might feel some threat from the USPS being in their business, those feelings are unfounded, says John Turner, CEO of UsersThink. "A USPS banking system would give those without financial stability and access at least some, which makes them more likely to be able to access more traditional banking in the future, creating a pipeline of new customers for said banks."
Then too, inevitably the banking industry would somehow become involved in the equation because the flow of finance is about interaction. Current banking customers will be seeking ways to pay and interact with customers of the USPS service, such as paying a friend or relative or co-signing for a loan, for example, says Lewis.
While there are real upsides, things don’t always play out as planned. "The consumers who need this service may have few or no alternatives and the USPS could initiate charges that would be unavoidable," says Lewis. She also points out that consumers could face brand or social stigma if the USPS offering is considered to be one for a marginalized population.
There is no guarantee that this would be a revenue bonanza that the USPS no doubt needs. That said though, it would still help the financially strapped system.
Lessons from the UK
The post office in the UK offers banking. The experience has been mixed, not perfect, but progress. "It has experienced some losses and has wrestled with finding the right business mix for profitability, as well as providing much-needed "convenience" services to underserved or rural populations," she says. The provision of financial services, in addition to other services where people can manage payments to the government make are incredibly convenient, so the service almost becomes a necessity, she contends.
"The USPS can learn a great deal from how the post office in the UK has operated and benefited. What strategies went wrong? Which strategies and products were most successful? When does the government need to step in, or step back? How do citizens value the services?" she points out.
Says Lewis, "The USPS is ideally poised to behave similarly to the post office in the UK. While the USA leads in many progressive solutions, it lags in other areas."