Image credit: USPS
Over the last couple of years there has been some discussion about using the U.S. Postal service to offer banking services for the benefit of the underserved. Among the possible services are savings accounts, loans and prepaid debit cards. The possibility is mind-boggling to some, but there are historical and international precedents that suggest that the idea could work.
From 1911 to 1967 the U.S. Postal System offered some banking services such as savings accounts. This system hit its peak in the 1940’s when it held over $3 billion in savings accounts from over 4 million customers. The system, however, was discontinued in the 1960’s after a long decline in usage. Interestingly, it was most used by immigrants.
The U.S. has not been the only country to offer banking services through its postal system. The far reach and inherent trust associate with to postal system allows it to encourage saving among poor and underserved populations. The U.S. initially took its cue from Britain which offered some banking services through its postal system. Other countries such as China and India have also done the same.
Some services that could potentially be offered by the U.S. Postal System include savings accounts, prepaid debit cards and even small loans. The U.S. Postal service currently sells money orders and has the corner market in money order sales. Now that digital platforms are available, these services can be made even more accessible to the underserved population.
Offering bank services through the post office could benefit the 10% of the American population that does not currently have bank accounts. The top reasons that people do not have bank accounts include a poor credit history and lacking the funds to open an account. These people end up paying a great deal more for banking services like loans and bill paying when they need them. They often fall prey to predatory lenders like payday and title loan lenders and rent-to-own stores. They also are more likely to have a prepaid payment card that charges them astronomical rates for usage. Being able to access banking services at a reduced rate from the U.S. Postal Service whether online or at a physical store can help them to save money and rebuild their credit. It can also encourage saving.
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