Should the USPS get into the financial services business as it searches for additional revenue streams? That’s an idea that the USPS Office of Inspector General (OIG) proposed in a recent report. The OIG suggests it could lead to $8.9 billion in new revenue per year for the Postal Service. The idea is controversial and, not surprisingly, politicians are weighing in on the matter.
The OIG report specifically looks at “non-bank financial services” that would complement current offerings from banks by helping them reach customers in geographic areas where they lack a physical presence, by offering products to customers who were not previously a main focus of banks, and by helping some customers transition to traditional bank savings or checking accounts – “the Postal Service could create a “win – win” situation,” according to the OIG.
So who would be the losers? The payday loan industry, for one. Democratic Senator Elizabeth Warren (MA) likes the idea as an alternative to payday loans, an industry accused of engaging in predatory lending. The Boston Globe said borrowers spend on average $520 in finance charges for payday loans averaging $375, citing the Safe Small-Dollar Loans Research Project at the Pew Charitable Trusts.
And, the Globe reports, more than 90 percent of bank branches that closed since 2008 are in lower-income areas. The newspaper also noted, “from 1911 to 1967, post offices allowed consumers to make savings deposits but discontinued the practice as banks began to offer higher interest rates. Today, the agency provides money orders.”
The OIG notes that many international postal services are already providing financial services, which brings them additional revenue while meeting customer needs. “Although there is no “one size fits all” model for introducing postal financial services, due to differences between countries and posts, there are common success factors and implementation strategies across multiple postal operators.”
The OIG report also said of USPS international counterparts that offer financial services, “Successful financial services complemented the established banking sector, rather than openly competed with it. In part, this has been done by focusing on niches that traditional banks generally do not prioritize.”
The US Postal Service is looking at various ways to cope with the decline in first class mail and its obligation to prefund employees’ retirement health benefits, some of them considered “outside the box” thinking. Postmaster General Patrick Donahoe said the agency is seeing growth in the package business thanks in great part to ecommerce and is piloting a same-day delivery service called Metro Post while aggressively cutting costs and consolidating operations.
Postal Service spokeswoman Toni DeLancey told American Banker that the inspector general’s suggestion surprised the Postal Service, but now that post office banking is on the table, the agency plans to consider it. The magazine quoted DeLancey, “All that we’re able to say is that we’re open to any innovative ideas. And so it is something that we’ll evaluate.”
The full report is available on the USPS OIG website.