Washington — The U.S. Postal Service should consider fixing its massive budget shortfall by offering financial products such as debit cards, remittances and loans to underbanked consumers, according to a paper issued Monday by the agency's Office of the Inspector General.
The white paper said the beleaguered Postal Service could raise approximately $8.9 billion in additional revenue and reach potentially 68 million adults by offering such products, including international money orders and transfers.
The move could introduce a hefty player to the banking industry at a time when many bankers are cutting back or increasing costs on certain services largely due to heightened regulation. However, the OIG report says the suggestion is not meant to make the Postal Service a competitor to banks, even suggesting it could partner with institutions.
"To the contrary, 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," the report said. "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."
Other countries, including Great Britain, Japan, Germany and China already use their post offices to offer savings accounts and other products. The U.S. Postal Service did have a savings system established in 1911 but it closed in the mid-1960s after deposits declined largely because banks were able to offer a similar government guarantee on deposits through the Federal Deposit Insurance Corp.
The Postal Service has drastically changed since then and faces mounting pressure to fix its budget after hitting steep revenue shortfalls and cutbacks in recent years. On Sunday, the Postal Service said it would increase the cost of a stamp by three cents to 49 cents a stamp.
The white paper said that if the Postal Service were to begin offering financial services to the underbanked, it would be a "major new revenue" stream.
"If even 10% of what the underserved currently spend on interest and fees instead went to more affordable offerings from the Postal Service, it could lead to $8.9 billion in new revenue per year," the report said.