The Office of the Inspector General of the U.S. Postal Service may just have come up with a good idea: reviving financial services which would serve poor neighborhoods from which big commercial banks generally stay away.
In a white paper released late last month the USPSOIG has proposed offering non-bank financial services to about 68 million Americans who are very often prey to such disreputable entities as payday lenders and check cashing shops. The Inspector General estimates that people can pay nearly $2,700 a year in interest alone to such institutions https://www.uspsoig.gov/sites/default/files/document-library-files/2014/rarc-wp-14-007.pdf\
“We are suggesting that the Postal Service could greatly complement banks’ offerings. The Postal Service could help financial institutions fill the gaps in their efforts to reach the underserved,” says the report. “While banks are closing branches all over the country, mostly in low-income areas like rural communities and inner cities, the physical postal network is ubiquitous. The Postal Service also is among the most trusted companies in America, and trust is a critical element for implementing financial services.”
Not only could postal financial services help the poor, they could potentially offer the USPS a way out of its financial difficulties. The paper points to the fact that foreign postal entities still offer such services, The U.S. Post Office abolished postal savings accounts in 1968, largely because the Federal Deposit Insurance Corporation offered pretty much the same security guarantees to depositors as private banks and the Post Office lost its edge in terms of trust.
The Inspector General’s office counseled the USPS to partner with banks to develop these services and was careful to say it’s not proposing that the USPS compete directly with them.
USPS financial services could include:
*Reloadable prepaid cards with features that encourage people to save money.
*Mobile transactions and services to help the underserved take part in e-commerce.
*New ways to transfer money domestically and internationally,
*Small loans that would help customers cover unexpected expenses.
The USPSOIG naturally called for market tests of this new concept, noting that many foreign postal authorities have begun adding and profiting from financial services to their offerings,
Great idea. That’s why it’ll probably never happen.
For one thing, the banks are against it. While they often shun operating in areas where they cannot make windfall profits they don’t want anybody else to either. This is especially true when going against entity as well established or with the reach of the postal service. What might further scare banks is that the postal service already has a financial infrastructure in place through it provides such services as money orders, international money transfers and the like.
Observing the power of the banking lobby over the last few years prospects for the USPS to start offering financial services seem bleak at best.
As an example, no banks were ever prosecuted for all the mortgage fraud that took place leading up to the current recession and banks are well known to have armies of lobbyists in Washington charged with making sure their business can go on as usual.
And the list goes on and on
The banks don’t want to go after this market. But they don’t want anybody else to either. And who’s to say the payday lenders, check cashing joints and other exploitive institutions don’t also have their lobbyists?