According to a 2019 Federal Reserve report, 22% of American adults, or 63 million, are either “unbanked” or “underbanked,” which means they do not have easy access to a financial institution for them. doing things like cashing checks or saving money. money. Separately, a 2020 US Government Accountability Office report found that the US Postal Service lost $ 69 billion over 11 years, saying its “mission and financial solvency are increasingly under threat.”
A new USPS initiative is beginning to address the confluence of these two issues. The agency confirmed that it had been offering limited financial services since September 13 in four locations in the United States: the Bronx, New York; Baltimore; Washington DC; and Falls Church, Virginia. Customers of post offices in these areas can use paychecks and corporate checks to purchase gift cards “to provide customers with an alternative to traditional check cashing.”
In what it calls a “test pilot,” the USPS confirmed via email that customers will be able to purchase these one-time gift cards worth up to $ 500, using checks as a means of payment, in the amount of $ 5.95, regardless of the size of the check. The initiative was put together in conjunction with the American Postal Workers Union (APWU) and, although this is a very modest push towards postal banking, it is the largest since 1966.
The test pilot will allow the agency to generate much needed revenue. Its precarious financial situation began in 2006, when Congress passed an unprecedented bill requiring the Post to create its own $ 72 billion fund to finance the pensions of its employees – 75 years into the future – for which it had to get a loan from the Treasury. In the email statement, USPS spokeswoman Tatiana Roy said the offer aligns with Delivering for America, the agency’s 10-year plan “to achieve financial sustainability and excellence. of service “. The plan, released in March, aims to achieve a positive net profit in three years and “reverse the forecast of $ 160 billion in losses” in ten, thanks to a mixture of capital investments, changes in postal rates. and restructuring of mail processing equipment and operations.
At the same time, millions of people living in “banking deserts” need banking access. Post offices seem to be an appropriate solution: 59% of them are in postal codes that have no bank. Launching these pilots now also appears to be a response to these social pressures, says Mehrsa Baradaran, a University of California law professor and longtime supporter of postal banking, whom she wrote about in her 2015 book, How do the other half-banks. She says the first postal banks, first established in 1910, were created to accommodate the social needs of the time. Then nicknamed “the poor man’s bank,” the post office was used by rural farmers and immigrants, and the mail bank by troops during the two world wars; As with today’s pilot program, deposits were also capped at $ 500, she adds. But these services were discontinued in 1966.
The idea has regained popularity in recent years. A 2014 report from the Inspector General of Postal Services endorsed the idea, and progressive Democrats such as Senators Bernie Sanders and Kirsten Gillibrand have championed the concept, most notably in the Gillibrand Postal Banking Act of 2018. This spring, along with Representative Alexandria Ocasio-Cortez, they called for pilot program funding to be included in next year’s supply bill. Gillibrand reportedly hailed the program as a “great first step”, adding in a statement: “Although the products it will offer are not as broad as those contained in my legislation, a pilot program will demonstrate its value for these communities” .
Critics have long expressed fears of public competition with private banks, and they say banking for the under-served should be left to community banks, also known as minority depositories. In fact, the Post does not use the word “bank” when it talks about these pilots, but rather “financial services”. It is not a question of “large-scale postal bank”, recognizes Baradaran, but rather of coherent services with what the post office already offers, like money orders. “No one, including me, ever proposed that the Post become a bank or compete with banks,” she says.
Baradaran agrees that this is “absolutely” a sign of progress, adding that the next useful step would be to add a digital application component for easier access. And, since 90% of postcodes without banks or credit unions are rural, she says the agency should also establish rural pilots (which would also require, she notes, better rural broadband).