The US Postal Service’s Office of Inspector General (OIG) recently issued a report showing how postal banking could be expanded.
Post offices already provide limited banking services such as the sale of money orders, the most widely used alternative banking service in the US.
Expanded postal banking would make safe and affordable basic banking service available at local post offices for all postal customers, especially those living in rural and urban communities that are either not served or under served by traditional banks.
After the OIG report was released, unions representing employees of the Postal Service issued statements supporting postal banking.
“It’s a no brainer,” said Mark Dimondstein, president of the American Postal Workers Union (APWU). “The Inspector General’s report confirms that the Postal Service can act now to provide consumers with affordable financial services while strengthening the public Postal Service.”
APWU is currently negotiating a new collective bargaining agreement with the Postal Service and postal banking is one of its priority bargaining proposals.
“We look forward to the day when people can get their checks cashed by their trusted neighborhood (postal) clerk,” added Dimondstein.
A statement by the National Postal Mail Handlers Union issued in response to the OIG report said that the union supports legislation that will expand financial services at post offices.
Fredric Rolando, president of the National Association of Letter Carriers, praised the OIG’s report and said that postal banking has worked for years in other countries.
“(The OIG’s postal banking) model has been successful in many other countries and has the potential, according to the OIG, to generate at least $1.1 billion of revenue annually, which would allow the Postal Service to continue its innovative efforts,” said Rolando. “The OIG’s recommendations are a good place to start, and we urge the Postal Service to take steps to immediately pursue these opportunities to fill the unmet needs of those in under served communities.”
The OIG’s report, entitled “The Road Ahead for Postal Financial Services,” lays out four approaches for establishing postal banking.
Approach #1 would expand financial services that post offices are already authorized to provide including the sale of money orders ($21 billion in 2014), electronic money transfers, check cashing, bill paying, and postal operated ATMs.
At some point, the OIG would like to make more financial services, such as affordable interest-rate loans and savings accounts, available at post offices.
Between 1911 and 1966, the US Postal Services did offer postal savings account, but pressure from the banking industry ended this service.
Postal loans are available to postal patrons in UK at affordable interest rates.
Implementing postal lending and saving services would require legislative action.
Making these services available at post offices would be a great service to the 68 million people who live in communities under served by traditional banks.
According to the Campaign for Postal Banking, one in 13 US households doesn’t have a bank account. One in four households live in communities under served by banks.
Traditional banks have pulled up stakes in many of these communities. The banks have been replaced by the alternative financial services industry–check cashing stores, payday lenders, auto title lenders, etc.
They charge high fees and interest for the services they provide.
The average under served household, whose annual income is $25,500, spends $2,412 a year on fees and interest charged by alternative financial services companies.
Postal banking would provide an affordable alternative to the high-cost alternative financial service industry.
Postal banking would also provide easy access to financial services,
There are more than 30,000 post offices in the US, considerably more retail outlets than other large retail companies.
Many of these post offices are located in communities that have been deserted by banks. The Campaign for Postal Banking reports that 59 percent of US post offices are located in zip codes where either no bank (38 percent) or only one bank (21 percent) is located.
The OIG reports that the Postal Service has the infrastructure and the capacity to provide financial services to its customers. Expanding those services “would help the Postal Service improve the lives of millions of Americans as it fulfills its universal service obligation.” said the OIG report.