The United States Postal Service has beenunder a lot of pressure lately to cut its costs and end itsdeficit. It has proposed a number of solutions including cuttingservice to five days a week, changing its rules to allow shipmentsof beer and wine, and closing down rural post offices. The USPSsaid this week that it would keep many of its rural post officesopen but reduce their hours, sparing them from completeclosure.
What the Postal Service needs to do is invest in a new set ofproducts to help secure its future. Cuts will only continue toweaken it. Instead, it should make use of the assets it has and addfinancial services to the products it offers. The USPS has abroader network of offices than almost any company in the UnitedStates and is already set up to serve the entire population.
Like Post Offices in other countries around the world, the PostalService could begin to offer limited financial services and providea way for a large segment of the population to begin saving moneyand managing their financial lives more effectively. The move isnot entirely unprecedented.
From 1911 to 1966 the U.S Postal Service offered savings accountsand bonds. It was required to deposit the funds that it gathered inlocal banks as a way of avoiding competition with the privatesector. According to the USPS, savings reached $3.4 billion in 1947with 4 million depositors using the system.
This system could be revived and used to reach those who cannot orwill not use a bank account. The development of prepaid cards meansthat even more services can be offered to these individuals. ThePost Office is already selling open-loop gift cards. There is noreason to think that it could not offer services for generalpurpose reloadable cards.
Properly designed and re-launched, a suite of financial servicesoffered at Post Offices could provide a solution for the low andmoderate-income segments who need financial services but can’tobtain them through low-cost channels today. The system wasdiscontinued in the 1960s because of falling demand. Given thedemand for alternative financial services today, it seemsreasonable that there is an opportunity to revive thisprogram.