The return of postal banking? La Poste is testing new financial services


WASHINGTON – The U.S. Postal Service has quietly started offering a handful of new or expanded financial services in four cities, a potential first step towards a return to postal banking, which advocates say could help save the country’s finances. agency and to help millions of people who have problems with or not accessing the banking system.

Tatiana Roy, a spokesperson for the Postal Service, said in an email that the pilot program – a collaboration between the Postal Service and the American Postal Workers Union – began on September 13 and is aligned with the targets set over the 10-year period. plan the postal service announced in May.

Postal banking was not explicitly called for in the plan, which Roy said would help the agency “achieve financial viability and service excellence,” but it is a long-standing desire of politicians and progressive advocates whose attempts to get him through Congress in recent years have met with little success. It would take an act of Congress to restore postal banking beyond the limited services the Postal Service is starting to test, but the pilot program could serve as a proof of concept.

New services include check cashing, bill payment, access to automated teller machines, expanded and improved money orders, and expanded wire transfers. Select the locations of postal services in Washington, DC; Falls Church, Virginia; Baltimore; and the Bronx, New York, participate.

Mark Dimondstein, president of the American Postal Workers Union, said the test was “a small step in a very positive direction.”

“We see the expansion of services as a victory for the people of the country, a victory for the postal service itself, as it will bring new income and, of course, a victory for the postal workers who are extremely dedicated to the mission. , “Dimondstein said in a telephone interview.

The biggest change in the services provided by the Post Office is check cashing. Customers can use payroll or corporate checks to purchase one-time gift cards worth up to $ 500. Checks over $ 500 will not be accepted.

Many people do not have easy access to banks, but most can find a post office. According to a study released in May by the University of Michigan, 69% of U.S. census tracts with post offices – representing 60 million people – do not have community bank branches.

A lack of access, the costs associated with banking operations and a distrust of the banking system have also discouraged some people from using banks, excluding them entirely from the system.

About 8.4 million households, or 6.5% of households in the United States, are “unbanked,” according to the Federal Deposit Insurance Corp. but also use financial products and services outside the banking system, such as payday lenders.

“This is a case of market failure where the banking industry is not interested in serving these people because they are not profitable enough and where the postal service, because it is a government service, can intervene and help solve this market failure and ensure that these services are available, ”said Christopher Shaw, a historian who has authored the books“ Money, Power, and the People: The American Struggle to Make Banking Democratic ”and“ Preserving the People’s Post office “.

With 1 in 4 American households unbanked or underbanked, defenders of postal banking see a huge opportunity for the postal service to provide access to a vital financial system while strengthening its own economic position.

Senator Kirsten Gillibrand, DN.Y., praised the pilot program and said it should encourage Congress to pass its bill that would cut back all postal banking and “generate up to $ 9 billion per year for the USPS, thus helping with its finances. ”

“This is an important first step towards the creation of a postal bank,” Gillibrand said in a statement Monday. “While the products it will offer will not be as extensive as those contained in my legislation, the Postal Banking Act, a pilot program will demonstrate value to these communities and show that the USPS can effectively serve urban and rural communities under -banked. “

There are, however, critics and skeptics.

Paul Merski, vice president of congressional relations and strategy for Independent Community Bankers of America, a business group for small banks, pointed out that the Postal Service has provided nothing beyond a few simple financial services in almost 55 years old.

Customers of the main Washington post office in 1938. The Postal Service provided banking services from 1911 to 1967.Universal History Archives / Getty Images

“It’s just a bad idea that just doesn’t seem to want to go away,” Merski said. “The Post has struggled to keep up with mail delivery financially and has been losing billions of dollars year after year for over a decade now. You shouldn’t have to reassign the post office to do financial services – financial services have never been more complex. The postal service is by no means equipped to compete in the financial services space. “

Postal banking was once a popular option for low-income people after Congress passed legislation establishing the Postal Savings System in 1910. It was intended to encourage workers and immigrants to use the banking system while generating enough money. money to pay for.

The program began in January 1911, and by 1947 deposits in the system had peaked at $ 3.4 billion. In the 1960s, deposits fell to $ 416 million as more consumers turned to banks after raising interest rates and starting to provide other guarantees similar to those offered by the federal government. In 1967, the Postal Service began phasing out the program.

A report by the Office of the Inspector General of Postal Services in 2014 called for the postal service to revert to some form of postal banking and stated that “by improving existing financial services and expanding adjacent products, the service postal service could generate $ 1.1 billion in annual revenue. after a 5-year ramp-up.

Postmaster General Louis DeJoy at a hearing on legislative proposals to put the postal service on a sustainable financial footing on Capitol Hill on February 24.Jim Watson / Pool via AP file

Some fear, however, that Postmaster General Louis DeJoy may not fully support the pilot program and may undermine efforts to expand it further. Many Postal Service advocates have expressed a lack of confidence in DeJoy, citing his close ties to former President Donald Trump and the Republican donor class, as well as his efforts to make the Postal Service more business-oriented.

Porter McConnell, co-founder of the Save the Post Office Coalition, questioned the small size of the pilot program and the decision to test it only in large urban areas, rather than in rural communities that lack such services the most.

“He does the least he can do” McConnell said of DeJoy. “What would it be like if there was a forward-looking Postmaster General who was really strategic about new revenue streams, serving new populations and building a post office in the community center that it should be?” for the 21st century? If you think about it, this is all a little less exciting.

However, a new, more permanent postal banking program is not the responsibility of the Postmaster General.

Democrats in the Senate and House – including Progressive Senator Bernie Sanders, I-Vt., And Rep. Alexandria Ocasio-Cortez, DN.Y. – recently pushed for legislation that would restore postal banking. Larger pilot programs have also been included in recent supply bills.

“To get something extensive and permanent, Congress has to really get involved and make it happen,” said Shaw, the historian.

Julie Tsirkin reported from Washington and Phil McCausland reported from New York.

CORRECTION (Oct 4, 11:02 a.m. ET): A previous version of this article misstated the number of post offices that are currently offering extended financial services under a four-city pilot program. There are a number of locations in these four cities, not all of them.

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