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Should the USPS Expand Postal Banking Services?

While the USPS is best known for delivering the mail, it’s also the number one seller of the most widely used type of alternative financial service in the United States: the Postal Service sold 97 million money orders with a face value of $21 billion in fiscal year 2014.

The Postal Service also offers international money transfers, prepaid gift cards, and limited check cashing.

The USPS Office of Inspector General (USPS OIG) published a report, “The Road Ahead for Postal Financial Services,” exploring how the Postal Service could “expand its financial offerings to benefit Americans and generate much needed new revenue.”

The Inspector General reminded readers that from 1911 to 1967, the USPS offered savings accounts through the Postal Savings System, which it said prompted millions of Americans to “move a portion of their nest eggs from under the mattress into savings accounts.”

The USPS OIG report noted that among the 31 million American households that used alternative financial services in the past year, 69 percent used money orders, making them by far the most widely used alternative financial product.

In discussing the purchase of postal money orders, the OIG said to get the funds to purchase those money orders, many families likely first went to expensive check cashers to convert their paychecks into currency.

“What if those consumers could instead cash their paychecks at a post office for a lower fee? What if they also could pay bills, buy low-fee prepaid cards, and maybe even get affordable small-dollar loans, all in one convenient location? This could help consumers save money and time, and it would help the Postal Service fulfill its mission to facilitate commerce and serve citizens.”

Americans are broadly in favor of postal financial services, according to the OIG report.

The simplest way for the Postal Service to grow its financial services business is to expand the products it already offers, which include domestic and international paper money orders, international remittances (currently branded as Dinero Seguro/Sure Money), open- and closed-loop gift cards, and limited check cashing. The Postal Service also has authority to rent out space in post offices for things like ATMs.

With the exception of domestic money orders, these products are sold in small volumes at relatively few locations, and most of these products receive little, if any, advertising or strategic oversight. Yet some have tremendous potential for growth – particularly check cashing and international remittances.

Substantive changes in the product design, pricing, and marketing of current offerings could bring great improvements in serving customers and enhance the financial performance of the Postal Service’s current portfolio.

While the 2006 Postal Accountability and Enhancement Act (PAEA) generally prohibits the Postal Service from offering new nonpostal services, the Postal Service might be able to expand into adjacent services with the Postal Regulatory Commission’s (PRC’s) approval.

In a statement, the president of the American Postal Workers Union Mark Dimondstein called the move a “no-brainer,” saying it could bring in $1.1 billion in annual revenue within five years. The union was one of the organizations that helped form the “Campaign for Postal Banking.”

But not everyone is in favor of postal banking. The Independent Community Bankers of America strongly disagrees with the assertion that the answer to the U.S. Postal Service’s growing operational, management and financial troubles is entering the banking industry.

Financial services are being provided competitively in the private sector. The last thing we need is more government intervention in Americans’ personal finances – one that would further put taxpayers on the hook for the Postal Service’s mounting losses. The Office of Inspector General’s proposal would be a disaster waiting to happen.

It also had sharp words for the USPS OIG. “The OIG’s office should cease playing the role of business consultant to USPS and instead focus on evaluating and improving USPS’ existing programs – which is the traditional role of an Inspector General.”

See the USPS OIG announcement that contains a link to the full report on the USPSOIG.gov website.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.