According to a 2019 Federal Reserve report, 22% of American adults, or 63 million, are either “unbanked” or “underbanked,” meaning they do not have easy access to a financial institution to help them. doing things like cashing checks or saving money. money. Separately, a 2020 report from the US Government Accountability Office found that the US Postal Service had lost $ 69 billion in 11 years, stating that “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 set up 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 in 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 to “reverse the forecast of 160 billion dollars of losses” in 10, 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 who live in “banking deserts” need banking access. Post offices seem to be suitable solutions: 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; like today’s pilots, deposits have also been capped at $ 500, she adds. But these services were discontinued in 1966.
But the idea has regained popularity in recent years. A 2014 report of the Inspector General of Postal Services report endorsed the idea, and progressive Democrats such as Senators Bernie Sanders and Kristen Gillibrand championed the concept, most notably in the Gillibrand Postal Banking Act of 2018. This Spring, along with Rep. Alexandria Ocasio-Cortez, they called for pilot funding to be included in next year’s supply bill. Gillibrand reportedly hailed the pilot project as a “great first step,” adding in a statement: “While the products he will offer will not be as broad as those contained in my legislation, a pilot program will demonstrate value to these communities. “
Critics have long expressed fear of public competition with private banks, and they say banking for the underserved should be left to community banks, known as minority depositories, and that the Post does not use the word “bank” when discussing these pilot projects. , rather “financial services”. It is not a question of “large-scale postal banking”, agrees Baradaran, but rather of services conforming to what the post already offers, such as money orders. “No one, including me, ever proposed that the Post become a bank or compete with banks,” she says.
Baradaran agrees 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).