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CU Exec Not Impressed with Idea of U.S. Postal Service Offering Bank-like Services
Monday, July 28, 2014 7:00 AM

Mark Colley, president of Tulsa Postal and Community FCU tells The Journal Record Reporter Brian Brus that he is not impressed with the idea of the U.S. Postal Service branching out to bank-like services.

“The Postal Service has its own troubles with money,” he said. “Do they really think that there will be people out there who trust handing their money over to an organization that can’t balance its own budget?”

The U.S. Postal Service Office of Inspector General early this year proposed the possibility of offering financial services to consumers who don’t have access to affordable, mainstream alternatives. Officials said the USPS infrastructure, with 30,000 locations, is well-positioned to meet the needs of so-called unbanked or underserved Americans with payment services such as reloadable debit cards, small loans and products to encourage savings.

Report authors stopped short of cutting into the banking market, however.

“The Office of Inspector General is not suggesting that the Postal Service become a bank or openly compete with banks,” according to the report. “We are suggesting that the Postal Service could greatly complement banks’ offerings. The Postal Service could help financial institutions fill the gaps.”

According to Rick Grady, vice president of research or the Cornerstone Credit Union League, the idea is not novel – the USPS experimented with savings accounts in the 1960s.

“Actually the idea was floated in the U.S. by President Theodore Roosevelt in 1907 when he observed how efficiently the system operated in rural areas of Europe and the Middle and Far East. Candidate William Taft made it part of his platform when he successfully ran for the Presidency in 1908,” notes Grady. “Postal banks are still in operation in numerous countries, especially in Europe, Latin America and the Far East, some in conjunction with credit unions. And the Postal Service already offers money orders and electronic money transfers to a few Latin American countries. Like many retailers, it also sells prepaid debit cards now.”

According to the Federal Deposit Insurance Corp., 8.2 percent of U.S. households lack banking services entirely, and 20 percent are underbanked. About 29 percent of households do not have a savings account, while 10 percent do not have a checking account. Officials discussing the USPS white paper said post offices could help alleviate that problem.

But some financial professionals say they already fill the niches.

“We’re well-positioned to serve all strata of the population, so I’m not sure who their target market would be and exactly how they would plan to go about it,” Matt Stratton, senior vice president at Tinker FCU tells The Journal Record readers. “It’s not exactly their expertise.”

Colley was of a similar mind.

“You can have all the infrastructure you want, but unless you have the expertise, then what good is it going to do you?” he asked.

Colley also questioned the premise that the Postal Service could reach people who don’t have access to financial services already, because if a community is large enough for a post office there’s probably a bank or credit union nearby.

Colley and others told the The Journal Record that even if the kinks can be worked out of a postal bank operation, the USPS has a seemingly insurmountable bad reputation that would defeat the concept immediately.

Russell Evans, an economics professor at Oklahoma City University, told Brus he was intrigued about how the USPS would capture revenue from banking services, especially since the Postal Service has run at a deficit for so long.

According to the report, the expansion could produce revenues of up to $8.9 billion annually, a big deal when the agency has been facing a 22-percent loss in mail volume over the last five years.

“Them finding a way to lose more money would not be beyond the realm of possibility,” Evans told readers. “Is the Postal Service thinking about charging money to accept deposits? … Payday lending comes to mind.”

“I still have in my mind the image of an old-fashioned, community bank and simple services, so I don’t know how this would fit in,” Evans added. “Banking has become so convoluted between traditional deposits and investment lending.”