Earlier this year, the Office of the Inspector General for the U.S. Postal Service circulated a white paper suggesting the post office begin providing “non-bank financial services to the underserved.”
To be clear, at the moment this is only an idea. The cash-strapped post office, which lost a staggering $5 billion last year, is looking for ways to increase its revenue. The report introduces the idea of banking services as a possibility. The white paper says that 68 million adults in the US do not have a bank account, and that they would benefit from the Post Office offering banking services. What is probably tempting them is the $89 billion the USPS says that these underserved customers paid to “alternative financial services” in 2012.
The white paper (PDF) floated the idea of payday loans, check cashing and digital currency exchanges, including Bitcoin. The post office views the future as a cashless economy with digital funds. So it is also exploring the idea of prepaid cards, wire transfers, e-commerce and mobile payments. See the image above (from the whitepaper) suggesting the range of services that would be provided.
A Range of Reactions
Predictably, bankers got riled up upon hearing the news, telling the debt-ridden USPS to stick to what they are supposed to do and not get involved in an area they know little about. An NPR story quotes Consumer Bankers Association CEO Richard Hunt as calling the idea essentially stupid. He says it is “the typical Washington, D.C., mentality. You’ve got an agency of the government losing money, so what do they say? ‘Well, maybe we should go to a field that we know nothing about ’cause there’s possibly money there.’ That would be like my flying a 747 because I slept at a Holiday Inn Express last night.”
Others suggested the plan would be a way to rescue the USPS from financial difficulties. Time Magazine, for instance, says the idea could “save the Post Office from extinction.”
Senator Elizabeth Warren wrote in an op-ed that if the USPS provided financial services it could make a difference in the lives of the poor. The poor, she points out, tend to pay high fees. They frequent payday lenders and check cashing services, instead of traditional banks.
Professor Lisa Savon pointed out in a different op-ed, in the Wall Street Journal, that it’s not so easy to make money on financial services. She writes, “I’m skeptical about whether the Postal Service can provide, on a large scale and at a better price, the financial products and services low- and moderate-income Americans want.”
For its part, the USPS’s Inspector General is insisting that all it wants to do is complement banks’ offerings. “The Office of Inspector General is not suggesting that the Postal Service become a bank or openly compete with banks,” the paper’s executive summary reads. “To the contrary, we are suggesting that the Postal Service could greatly complement banks’ offerings.”
A Case of Core Competencies
What many Americans don’t realize is that this isn’t exactly a new idea. The Post Office offered banking from 1910 to 1966. Thank William Howard Taft. So in one sense this proposal is suggesting that the USPS pick up from where they left off — simply updating for the 21st century.
Still, nearly 50 years have passed since the Postal Service last offered financial services. In that time, financial services have gotten far more technologically complex. For the USPS it would be like starting all over again at something brand new.
For now, talk about this proposal has died down. But these proposals have a way of not dying, and resurfacing later.
As small business owners – often heavy users of the USPS for mail and package delivery — most of us are challenged everyday with sticking to our core competencies.
For all of its status as a quasi-private enterprise, the USPS first and foremost owes the public a duty to deliver mail to all. Would you rather have a USPS that does a good job delivering mail and packages — or one that faces distraction, poor operating performance issues and losses that can follow when stepping outside core competencies?
It’s something to think about.