For U.S. Postal Banking, Models Exist Around the Globe
Bankers and their representatives harshly criticized a call for the U.S. Postal Service to offer financial products like debit cards and remittances to underbanked consumers, saying it was a dangerous and foolhardy idea.January 27
For those who know the history of postal banking in the United States, the firestorm that erupted Monday when it was suggested that the post office should offer financial services sounded quite familiar.
As far back as the 1870s, when banking at the post office was first proposed, banks have been lobbying against the idea. The American Bankers Association argued to Congress at the time there was no need for post offices to offer savings accounts because thousands of banks were already in that business.
On Monday, after the latest proposal for postal banking emerged, Camden Fine, president of the Independent Community Bankers of America, wrote on Twitter: "Worst idea ever!"
The Postal Service did provide consumer savings accounts from 1911 to 1967, and today the post office offers money orders and international money transfers. But for the most part, the Postal Service has stayed out of the core business of banking.
The 140-year-old brouhaha was revived this week when the Postal Service's inspector general office proposed that the post office start offering prepaid cards, a savings product, and small-dollar consumer loans. Among the goals: shoring up the Postal Service's sagging finances and meeting the needs of tens of millions of Americans who are underserved by banks.
The concept of consumers conducting banking transactions at their local post offices is not a novel one. Today, Japan, Germany, the United Kingdom, Italy, Switzerland, France and New Zealand are among the countries where the post office provides far more extensive banking than the USPS does.
"This is pretty standard in lots of other first-world countries," Sheldon Garon, a Princeton history professor who has studied postal banking internationally, and is a strong proponent of the idea, said in an interview Tuesday. "The U.S. wouldn't be doing anything radical, except by its own terms."
Garon is the author of a 2011 book titled "Beyond Our Means: Why America Spends While the World Saves," in which he chronicles the historical fights over U.S. postal banking. Central to those debates have always been comparisons launched by both proponents and opponents of postal banking with foreign countries.
Given that history, what follows is a brief look at the current status of postal banking in five other countries:
With $2.1 trillion of deposits, Japan Post is considered the largest publicly owned bank in the world. Japan has a long history of offering deposits through its postal system, and today its postal bank offers savings accounts, automated teller machines, bill payment, credit cards and money transfers.
Though Japan Post does offer some individual loans, they make up a small portion of the bank's overall assets, according to Columbia Business School's Center on Japanese Economy and Business.
Like the U.S. Postal Service, Japan Post faces declining mail volume and revenue. It maintains nearly 25,000 branches and far too many employees. But an effort to privatize Japan Post stalled in 2012.
Commercial banks have long complained that Japan's postal service enjoys an implicit government guarantee on deposits of up to 20 million yen, double the guarantee for commercial banks.
Kiwibank, which is only 12 years old, offers a full line of banking products at New Zealand's post offices. The list includes checking accounts, investment products, car loans, mortgages, credit cards, remittances and business loans.
Kiwibank also offers personal loans that are at least somewhat comparable to what's being proposed by the USPS inspector general. These installment loans, for $2,500 or more in U.S. dollars, have an annual interest rate of 14.99% and repayment terms of anywhere from six months to seven years.
The New Zealand ownership of the bank has been a big part of its appeal, as it competes against large Australia-owned banks. Indeed, Kiwibank's website brags that the company "has Kiwi values at heart" and "keeps Kiwi money where it belongsright here, in New Zealand."
Kiwibank is the largest New Zealand-owned bank, and it produces 70% of the post office's profits, according to an October 2013 report that looks postal banking around the globe.
Postal banking in Germany dates back to 1909, and Postbank became an independent company in 1990. The company is now more than 90% owned by Deutsche Bank.
Today, with about $225 billion of assets and 19,000 employees, Postbank is a full-service bank. It has 1,100 branches of its own, in addition to more than 4,500 post office branches where select financial services are offered.
Among the products Postbank offers are checking and savings accounts, credit cards, brokerage accounts, home mortgages, and business loans.
Britain has a long history of postal banking, and today Post Office Ltd., a publicly owned business, offers a wide range of personal financial services. The list includes savings accounts, insurance, mortgages, credit cards, personal loans, payment services and ATMs.
In another foray away from the mail, the UK Post Office also sells broadband and phone service.
The Post Office, which is in the midst of an effort to modernize, operates 11,780 offices. Twenty-three percent of its annual revenue, or about $465 million in U.S. dollars, comes from financial services, according to its most recent annual report.
The Post Office has partnerships with various private-sector financial firms; for example, it provides ATM service to customers of other banks, including HSBC.
Canada is in an analogous situation to the United States, since it has also been considering whether to add a larger banking component to its postal service.
Though Canada's Post Office Savings Bank accepted deposits for more than 100 years, it was shut down in 1968. Canada Post does currently provide some financial services, such as money orders, money transfers, bill payment and prepaid Visa cards.
Because of the post office's declining revenue, Canadians have reignited the debate about whether to re-launch a Post Office Bank primarily as a means of raising revenue to preserve universal postal service.
A study last year by the Canadian Centre for Policy Alternatives found that Canadian banks were not providing adequate service to the unbanked and underbanked.
The study recommended that the Canadian government immediately establish a task force to determine how the post office could provide savings accounts, low-fee checking accounts, low-interest credit cards and prepaid debit cards.