Kennedy: Banking at the post office


The post office as a pseudo bank branch? Where did that oddball idea come from?

History and necessity, it appears.

The concept surfaced in headlines earlier this month as the U.S. Postal Service acknowledged a pilot launched quietly in mid-September in four communities to gauge interest: the Bronx, Baltimore, Washington, D.C., and Falls Church, Va.

There, customers can cash payroll or business checks of up to $500, turning them into Visa gift cards that can be used to buy goods or withdraw cash at an ATM.

The goal is to offer another option to “unbanked” or “underbanked” Americans – those without bank accounts who tend to use high-cost alternatives such as payday loans and check-cashing services to meet their financial needs.

As of 2019, 7 million U.S. households were unbanked, according to the latest survey from the Federal Deposit Insurance Corp., versus 124 million households with at least one bank or credit union account.

That unbanked rate of 5.4% was a record low in the biennial surveys conducted over the last decade, the FDIC said. But in a postscript, the agency expressed concern that the rate could be higher in the next survey due to the drubbing workers took as the economy shut down in the early days of the coronavirus pandemic.

Supporters of postal banking note that post offices already offer money orders and wire transfers. And from 1911 to 1967, under the Postal Savings System, post offices accepted savings deposits from customers, the bulk of which was then redeposited into local banks to earn interest for the system. (Overseas, banking through a post office is common.) 

Meantime, a study from the University of Michigan in May noted that about 25% of census tracts in the country with a local post office don’t also have a bank or credit union branch – meaning the Postal Service’s network of 31,000 retail locations could offer easy access for the unbanked.

U.S. Sen. Kirsten Gillibrand (D-NY) has tried for several years to create a “postal bank” to offer basic financial services while also yielding new revenue for the money-losing Postal Service.

In response to news of the four-site pilot, she praised the idea as “a great first step” in a news release but noted that the Postal Banking Act she proposed last year with Sen. Bernie Sanders (I-VT) would be more expansive in the kinds of services offered.

The legislation would establish a nonprofit bank to allow the Postal Service to offer low-cost checking and savings accounts, ATMs, mobile banking, and low-interest loans – all without the involvement of any established financial institution.

“Postal banking is an elegant solution to a complex problem – not only will it help the unbanked and underbanked, but it would generate as much as $9 billion per year for the USPS [U.S. Postal Service], helping to shore up its finances,” she stated.

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]



Categories: Business

Leave a Reply