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Insider’sreport

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Going postal on financial services

By Patti Murphy banks and credit unions. And the union is not alone.
ProScribes Inc. Several prominent Democrats have sponsored legislation
that would allow the USPS to offer low-cost checking and
re banking services in the cards for the U.S. savings accounts, mobile banking and low-cost loans.
Postal Service? This question has been bandied
about for years, but has failed to gain traction. And in 2015, the USPS Inspector General’s office issued a
A It’s not a novel concept. The USPS has been report in which it estimated that offering basic banking
selling money orders for years, and in the first half of the services would generate $9 billion in revenues for the
20th century, operated a Postal Service Savings System. financially beleaguered Postal Service. The move has
significant opposition from Republicans in Congress.
The savings system was slow to take off, but at its peak, About 20 Republican Senators wrote the postmaster
in 1947, more than 4 million depositors had $3.4 billion general condemning the four-city pilot. “The Postal
(nearly $42.2 billion in today’s dollars) on deposit with Service lost tens of billions of taxpayer dollars when it was
the system. The program was shut down in the mid-1960s, focused solely on delivering mail. If you think the USPS is
when branch banking began to flourish. inefficient now, wait until it tries its hand at banking and
delivering mail at the same time,” said Sen. John Kennedy,
This September, the USPS began a small pilot in a first step R-La.
toward offering a broader spectrum of financial services.
The pilot is running in one post office in each of four Sen. Kennedy has a point. But so do those who see the
East Coast cities—Baltimore, Md, Washington, D.C., Falls USPS as a conduit for serving the millions of Americans
Church, Va., and Bronx, N.Y. Services include cashing who are underserved by banks and credit unions. More
payroll and business checks for amounts up to $500, with than one in five American households currently relies,
the funds loaded onto a Visa gift card. At a cost of $5.95 at least in part, on nonbank financial services providers,
for the card, it’s a better deal than most commercial check- like check cashing, money order, and short-term loan
cashing services, which typically charge 5 percent or more companies, according to the Federal Deposit Insurance
of face value of a check. Corp.

Opposition abounds The agency reported that 5.4 percent of households are
unbanked; 16 percent are under-banked, meaning they
The move seems in part a response to pressure from have bank accounts but also use nonbank service providers.
the American Postal Workers Union, which successfully The FDIC also warned that the COVID-19 pandemic could
negotiated postal banking pilots during contract push even more Americans into un/under-banked status.
negotiations in 2016. The USPS has been careful not to
use the word "banking" in describing the pilot, preferring There are far more bank branches—nearly 75,000 in 2020,
instead to use the term "financial services offerings." And according to the FDIC—than USPS offices. But many bank
for good reason: banks and other regulated financial branches are in urban and suburban areas. The USPS
institutions are adamantly opposed to the USPS getting has offices in every ZIP code, and in 2015, 59 percent of
into banking. In a July 2021 letter to lawmakers, the those ZIP codes had no bank branches, according to the
Independent Bankers Association of America wrote, USPS IG’s report. I can only imagine that percentage
“Postal banking in any form is an ill-advised idea fraught has increased, as more banks shutter branch offices and
with unintended consequences.” migrate more customers to mobile and online banking. But
many consumers in rural areas lack broadband internet
The APWU, however, believes the USPS, which operates access, which means they can’t easily access mobile and
more than 31,000 offices nationwide, is an ideal conduit online banking services.
for banking consumers who have little or no access to
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