• on May 25th, 2015 in Ideas Worth Exploring | 0 comments

    The U.S. Postal Service is best known for delivering the mail. But did you know it’s also the number one seller of the most widely used type of alternative financial service in the United States? We’re talking about money orders, which function like prepaid checks. The Postal Service sold a whopping 97 million of them with a face value of $21 billion in fiscal year 2014.

    The Postal Service also offers international money transfers, prepaid gift cards, and limited check cashing. From 1911 to 1967, it even offered savings accounts through the Postal Savings System, which prompted millions of Americans to move a portion of their nest eggs from under the mattress into savings accounts.  

    In our recent white paper, The Road Ahead for Postal Financial Services, we explore how the Postal Service could expand its financial offerings to benefit Americans and generate much needed new revenue. (This is a follow-up to our January 2014 paper, Providing Non-Bank Financial Services for the Underserved.) We hired financial consultancy Mercator Advisory Group to help us look at the pros and cons of several different approaches the Postal Service could take. But we dove deepest into what it probably is allowed to do under current law; namely, beef up and improve existing products and expand into adjacent, related services like payroll check cashing, domestic electronic money transfers between post offices, and walk-up bill paying. Our analysis shows that – assuming Postal Regulatory Commission approval – a suite of these potentially allowable products could, after a 5-year ramp-up, bring in $1.1 billion in annual revenue while covering costs and contributing profits.

    We welcome your input. 

    • Should the Postal Service look at new business lines that are not directly related to mail and delivery?
    •  Which financial products do you think the Postal Service should provide? 
    • What do you think are the biggest barriers to success in postal financial services?  
  • on Jan 29th, 2014 in Ideas Worth Exploring | 12 comments

    Could the U.S. Postal Service help the nearly 70 million Americans who are cut off in some way from the mainstream financial system? We’re talking about people who, because they lack ready or full access to normal banking services, paid $89 billion in fees and interest to alternative financial service outlets such as payday lenders and check cashers in 2012 alone. They are the financially underserved – also known as the underbanked or unbanked – and many of them are one unexpected expense away from bankruptcy or homelessness.

    According to our recently released white paper, Providing Non-Bank Financial Services for the Underserved, not only can the Postal Service help the financially underserved, but it is also well-suited to the task. For starters, the Postal Service network extends to every community across the country. And while the Postal Service already offers money orders and international money transfers, the paper identifies a suite of additional services and products the Postal Service could develop, mainly through partnerships with banks:

    • Payment services
    • Reloadable prepaid cards
    • Options for mobile transactions
    • Access to small loans

    By offering these kinds of services, the Postal Service could help bring financial stability to millions of Americans. It could also generate income: Even if only 10 percent of the money paid in interest and fees were instead spent on less-expensive Postal Service alternatives, the Postal Service would realize $8.9 billion in new revenue.

    Moreover, when you consider that 59 percent of post offices are located in ZIP Codes that have only one bank or none at all, and that surveys repeatedly demonstrate the public’s unmatched trust in the Postal Service, developing non-bank financial services would not only meet a market need, but also fulfill a public purpose.

    What do you think? What types of non-bank financial services could the Postal Service provide to help address the needs of the underserved?