The return of post banking? Postal Service is testing new financial services

WASHINGTON – The U.S. Postal Service has quietly begun offering a handful of new or expanded financial services in four cities, a potential first step towards a return to postal banking that proponents say could help save the agency’s finances and millions of dollars To help people who are restricted or do not have access to the banking system.

Tatiana Roy, a spokeswoman 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 that it was with the goals of the 10-year period matches plan announced the post in May.

Postbanking wasn’t specifically called for in the plan, which Roy said would help the agency “achieve financial sustainability and excellent service,” but it’s a long-standing wish of progressive politicians and advocates whose attempts to do it in recent years getting through Congress had little success. A law of Congress would be required to rebuild postal banking beyond the limited services the postal service is beginning to test, but the pilot program could serve as a proof-of-concept.

New services include cashing of checks, paying bills, access to ATMs, expanded and improved money orders, and expanded wire transfers. Selected Postal Service Locations in Washington, DC; Falls Church, Virginia; Baltimore; and the bronx, new york, are there.

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

“We see the expanded service as a gain for the people of the country, as a gain for the postal service itself, because it will bring new income, and of course as a gain for the postal workers who are very dedicated to the mission. “, Said Dimondstein in a telephone interview.

Cashing of checks is the biggest change in the services that the postal service offers. Customers can purchase up to $ 500 worth of single-use gift cards using pay slips or business checks. Checks for USD 500 are not accepted.

Many people do not have easy access to banks, but most can find a post office. Sixty-nine percent of the U.S. census areas with postal branches – representing 60 million people – do not have bank branches, according to a study published in May by the University of Michigan.

A lack of access, the costs associated with banking, and a distrust of the banking system have also deterred some people from taking advantage of banks and keeping them completely out of the system.

About 8.4 million households, or 6.5 percent of households in the United States, have according to the Federal Deposit Insurance Corp. no bank account, and 18.7 percent of US households (24.2 million) are “underserved” – meaning they can have checks or savings accounts, but also use financial products and services outside of the banking system, such as bank accounts. B. Payday Lenders.

“It 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 Post, being a government service, intervenes and that market failure can help and ensure these services are available, “said Christopher Shaw, a historian who wrote the books Money, Power, and the People: The American Struggle to Make Banking Democratic and Preserving the People’s Post Office.

Since 1 in 4 American households have no or no bank account, proponents of post banking see a great opportunity for the postal service to gain access to an important financial system while at the same time strengthening its own economic position.

However, there are critics and skeptics.

Paul Merski, vice president of congressional relations and strategy for the Independent Community Bankers of America, a trading group for small banks, said the postal service had been doing nothing but a few simple financial services for nearly 55 years.

Customers at the Central Washington Post Office in 1938. The Postal Service provided banking services from 1911 to 1967.Universal History Archive / Getty Images

“It’s just a bad idea that won’t go away,” said Merski. “The Post has struggled financially to keep up with mail delivery alone, and has been losing billions of dollars every year for over a decade. Don’t repurpose the post office for financial services – financial services have never been so complicated. The postal service is in no way, shape or form suitable for competing in the financial services sector. “

Postbanking was once a popular option for low-income people after Congress passed a law establishing the postal savings system in 1910. It aimed to encourage working people and immigrants to use the banking system while making enough money to pay for themselves.

The program began in January 1911 and by 1947 deposits in the system had peaked at $ 3.4 billion. Deposits dropped to $ 416 million in the 1960s when more consumers turned to banks after raising their interest rates and providing other guarantees similar to those offered by the federal government. In 1967 the postal service began to phase out the program.

A 2014 report by the Postal Service Office of Inspector General advocated the return of the Postal Service to some form of postal banking, saying that “By improving existing financial services and expanding to related products, the Postal Service will generate annual sales of Could reach $ 1.1 billion “. after a 5-year attempt. “

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

However, some fear that Postmaster General Louis DeJoy will not fully support the pilot program and could undermine efforts to expand it further. Many supporters of the postal service have expressed a lack of confidence in DeJoy, citing his close ties with former President Donald Trump and the Republican donor class, as well as his efforts to make the postal service more business-oriented.

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

“He’s doing the least he can” McConnell said about DeJoy. “What if there was a forward-thinking postmaster general who was really strategic about new sources of income, serving new populations, and building a post office into the community center that it should be for the 21st century? When you think about it, it’s all a little less exciting. “

However, a new, more permanent Postbank program is outside the remit of the Postmaster General.

Democrats in the Senate and House of Representatives – including progressive Sen. Bernie Sanders, I-Vt., And MP Alexandria Ocasio-Cortez, DN.Y. – recently promoted legislation to restore postal banking. Major pilot programs were also included in the most recent budget bills.

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

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

CORRECTION (Oct 4, 11:02 am ET): An earlier version of this article incorrectly stated the number of post offices that are currently piloting advanced financial services in four cities. It’s a select number of locations in these four cities, not all locations.

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