The Postal Service’s financial woes are well known. The problems are complex, but some say postal banking could be a new revenue stream that helps the USPS out of its money problems.
Banking has been a role the US Postal Service has played before. The Postal Savings System existed between 1911 and 1967. This service filled a need when immigration to the US was booming. Immigrants came from cultures where banking at the post office was commonplace, and they felt comfortable with a similar arrangement in their new home. Postal banking was a widely used service during this time. During the depression, citizens lost confidence in banks, which also contributed to the Post Office’s reputation as an attractive and convenient place to save. The US government backed deposits in the Postal Savings System. Banks didn’t insure deposits until 1933, when the Federal Deposit Insurance Corporation (FDIC) was established to safeguard depositor funds. By the time the Post Office discontinued the system in 1967, deposits had declined significantly from their post-World War II peak.
Points in Favor
Proponents in favor of restoring USPS banking services point to a portion of the US population unserved by traditional banks. Estimates for the number of un-banked people reach as high as seven percent of the population. This group doesn’t have savings or checking accounts. They rely on high-cost alternatives like check-cashing companies to handle financial transactions. Another 20% may be under-banked. When they have a financial need, this group patronizes services like payday loans or car-title lenders, who charge enormous fees and sky-high interest rates.
A postal bank would give low-income consumers an alternative to predatory lenders where they can spend up to 10% of their annual income in fees and interest. Relief from these high-cost financial service providers would make a difference in the lives of families and individuals struggling to get by. The geographic distribution of post offices and the large number of locations also addresses the flight of conventional bank branches from impoverished neighborhoods. With postal banking, the Postal Service’s commitment to universal mail service would extend to consumer banking access.
Another argument for postal banking addresses rural and remote communities. A full-service bank branch needs a certain density of population to make it profitable. Some areas in the US are “bank deserts” where bank branches have closed and no workable alternative exists. The US Postal Service already has facilities in 13,000 communities with less than 2,500 residents. They need not spend money on separate buildings or added employees to handle banking transactions in rural areas.
Others believe a brick and mortar approach ignores mobile banking trends. Much of the non-banking population today own mobile phones. If mobilizing services solves the banking problem for low-income residents, perhaps postal banking needn’t be part of the solution.
Big concerns for the USPS as a money lender should be risk, defaults, and collections. All lenders face these issues. The USPS would be no different. One might predict they’d have an even bigger problem than conventional lenders. A typical USPS loan recipient would be a low-income borrower, perhaps living paycheck to paycheck. Default risk would be elevated and should trigger higher interest rates, but the target population needs to break out of the high interest payday loan cycle. Lending money at rates below the level dictated by the risk might end up costing the USPS more money than it generates.
Options and Considerations
Finally, there’s the USPS image to consider. Consumers have long rated the US Postal Service as the nation’s most-admired government entity. If postal banking forces them into the debt-collection business, that reputation may take a beating. Another government entity that collects money from citizens through wage garnishment and repossession is the IRS. They are decidedly unpopular among the citizenry. The USPS could suffer the same fate, turning public opinion against them and encouraging political adversaries to be more aggressive about privatization.
If the US Postal Service were to get into the banking business, they might consider exploiting their location advantages. The USPS could allow existing financial institutions to lease space in selected post office buildings. Banks would agree with the government about rates, fees, lending criteria, risk assessment, collection, and levels of service. The USPS would collect lease payments, but leave financial operations to the banks.
Monetizing Existing Data
Instead of banking or other retail-oriented activities, the US Postal Service should look for ways to monetize the information they are collecting about mail, logistics, or consumer preferences. Data is the most valuable currency today, and the USPS has a ton of it.
What if Informed Delivery included opt-in and opt-out buttons for the scanned mail pieces? Would mailers pay the USPS to notify them when a recipient on their list doesn’t want to receive their catalog or other direct mail marketing piece anymore? It seems it would be less expensive to pay the Postal Service for this information and drop names from mailing lists than to continue mailing to uninterested consumers.
Informed Delivery might even provide consumers an easy way to provide marketer-requested feedback. Does the catalog come too often? Is it a duplicate? Has the consumer lost interest in the products? Is there another product category more appropriate? Does the consumer only shop online? Marketers might use information like this to direct their future marketing efforts and would pay a reasonable fee for the data, perhaps on an annual subscription basis. The USPS would automatically collect and transmit the information to subscribed marketers about their mail. After developing the system, costs would be minimal.
The USPS can make money by helping mailers be more efficient and by keeping mail relevant. That’s a tough sell because sometimes it means assisting with a decrease in volume, where postage is the primary income source. But aren’t we heading towards a time when lower mail volume is the new normal anyway?
Rather than concentrating only on promotions and projects aimed at preserving or increasing mail volumes, maybe it is time to broaden the scope. A more diverse set of income-producing activities could stabilize the future of the US Postal Service.
Data Collection and Transmission
Besides mail-related data, perhaps the Postal Service could take advantage of its mobile workforce as data collectors. Delivery vehicles and drivers are in every neighborhood, six days a week. The USPS already equips vehicles with GPS devices that feed data to Informed Visibility. Information about the physical environment in which the postal carriers operate would be of value to other organizations. Data collection and transmission would be billable services.
Utility companies, cities, counties, and private companies might have use for meter reading, status updates on road conditions, overgrown trees, or road sign damage. Postal employees would acquire data via cameras, carrier reports, or by tracking route deviations that indicate detours and road construction.
It seems to me the USPS could be more vigorous about reacting to the ways its business is changing. It has done this in the past with many automation implementations. Shrinking postage sales will challenge the US Postal Service to earn the revenue it needs to continue providing a much needed service to businesses and citizens. Making money from something other than postage will prevent the USPS from having to raise rates to levels that encourage mailers to lessen their dependence on postal mail.
Mike Porter at Print/Mail Consultants helps his clients meet the challenges they encounter in document operations and creates informational content for vendors and service providers in the document industry. Follow @PMCmike on Twitter, send a connection request on LinkedIn, or contact Mike directly at firstname.lastname@example.org.