Why America is Experimenting With ‘Postal Banking’

From the editorial board of the Pittsburgh Post-Gazette: In 1947, more than 4 million Americans owned $3.4 billion in saving deposits held not by a bank or credit union, but by the United States Postal Service. It’s a largely forgotten part of American banking (and postal) history that the USPS ran the Postal Savings System for 56 years, from 1911 to 1967… [T]o this day postal services around the world provide small-scale financial services, from check cashing to savings accounts to e-commerce solutions, such as allowing refunds for returned goods to be deposited directly into a consumer’s postal account. In September, the U.S. Postal Service took the first steps toward restoring its place in Americans’ financial lives: At four East Coast post offices, customers can now get paychecks or business checks worth up to $500 cashed for a flat fee of $5.95….

Postal banking has the potential to reorient the American financial landscape for the benefit the most vulnerable. A fifth of Americans are considered “unbanked” or “underbanked,” often relying on unscrupulous payday lenders because they lack the week-to-week security to set even a little aside in a traditional account. According to a 2014 USPS report, in 2012 alone these “alternative financial services” wrung $89 billion in interest and fees out of the poorest Americans… Postal banking also has a bipartisan pedigree. While it has most recently been a centerpiece of the progressive platforms of Sen. Bernie Sanders, I-Vt., it has also been promoted by reformist conservatives as a way to get and keep capital in local communities, rather than having it held in the coffers of multinational conglomerates.

And finally, an expansion into basic financial services may be essential to the very survival of the U.S. Postal Service. As Amazon and private shipping companies continue to press their advantage, the Postal Service can press its own: thousands of locations in every nook and cranny of the country, along with broad community trust.

This modest pilot “is the foundation for more expansive contemplated postal banking services that could include bill-paying services, ATM access and money-order and wire-transfer capabilities,” argues a follow-up piece in the same newspaper: Local bank branches are shuttering in communities all across our country, and mainstream banks are failing to offer financial services that meet the needs of many communities… Robust postal banking, which should ultimately include checking and savings accounts as well as loan options, could step into the breach and provide equitable, accessible and affordable financial services to people who lack access to traditional bank services and would otherwise have to turn to high-cost and low-value fringe financial institutions… Underbanked households have an average annual income of $25,000 and typically spend approximately 10% of their income on fees and interest to fringe financial institutions simply to access their money — an amount equal to what the average household spends on food annually…

Postal banking provides an economic lifeline to countless Americans living in banking deserts. The Postal Service’s 34,000 facilities service every ZIP code in the country. More than two-thirds of the census tracts that have a post office do not have a bank branch. Postal banking also provides transparent and equitable services and costs. Traditional bank fees and requirements — such as minimum balance requirements, activity fees and overdraft charges — exclude low-income and small-balance customers… Postal banking is a key pathway from poverty to economic mobility for millions of Americans and also produces significant revenue and opportunities for the Postal Service to flourish and expand its business model.