Long before payroll cards or prepaid debit, there was the U.S. postal system.
Beginning in 1910, and lasting more than five decades under the authorization of Congress, U.S. post offices offeredsavings accounts, targeting those who today would be referred to as the unbanked. The government hoped this option would be seen as an attractive alternative to cookie jars and mattresses, which so many people, distrustful of banks, favored at the time-particularly immigrants and the working class.
Deposits peaked at nearly $3.4 billion in 1947-$32.8 billion in today's money-before a confluence of factors, including higher interest rates available from banks and U.S. savings bonds, sapped the Postal Savings System of its popularity, leading the program to cease operations in 1967.
Half a century later, the U.S. Postal Service itself is in financial trouble. Could its saving grace be a revamped effort to help people in similar straits?
Ben Jackson, a senior analyst at Mercator Advisory Group, thinks so. He sees an opportunity for the USPS to sell banking products, especially to the 40 million U.S. households that are either unbanked or underbanked.
"Politically, I think that it would be easiest to say, 'We're going to be the depositor of last resort just to kind of help these people get their act together,'" Jackson says.
He argues that the Postal Service already has a lot going for it as a financial services provider. Despite years of belt-tightening measures, there still are nearly 32,000 post offices nationwide. Even Bank of America sounds small in comparison, with its roughly 5,700 branches.
The post office staff already is trained to interact with the public, to deal with private information and to handle money orders, having issued 116 million of them in 2011 with a value of $22.4 billion.
The USPS also has experience with prepaid cards, which have become increasingly popular in recent years with the unbanked. Some of them view prepaid as a practical alternative to traditional checking accounts and a way to avoid surprise fees.
From 1996 through 2006, the Postal Service offered reloadable prepaid cards. And in June 2011, it started a pilot program selling American Express gift cards. These one-time-use cards, carrying an activation fee of $3.95 to $5.95 depending on the amount on the card, are currently in about 5,000 post offices. More than 175,000 cards have been sold so far.
But perhaps the USPS's most compelling qualification for becoming a financial services provider, Jackson says, is that people not only trust the Postal Service but are "very emotionally attached in a strange way" to their local post office. "Those are the people who bring you your checks in the mail," he says. "Those are the people who bring you your Christmas cards."
The public outcry that recently derailed a proposal to close 3,700 rural offices attests to the strong attachment people have. In an era of Occupy Wall Street protests, that kind of esteem is golden.
But the USPS's chief financial officer, Joe Corbett, says the agency has explored offering banking services and found the return would not make a big enough dent in its multibillion-dollar budget deficit to be worth the effort.
In other countries where financial services are offered through the post offices-even Japan, where the practice is well established and quite profitable-those services bring in only about 7 percent of total operating revenue, Corbett says. "And only about 10 percent of a bank's revenue actually falls to the bottom line, so you would be talking about a very small addition to our profit, even if we successfully become an average-sized bank in a very short period of time."