It’s rare that Postmaster General Louis DeJoy does something worth praising. On his watch, the quality of service provided by the US Postal Service has, for the most part, been in decline. Mail delivery has slowed, for example, while postage prices have gone up. But the post office is at least moving in the right direction when it comes to introducing a new offering to customers: financial services.
Last month, following an executive order by President Biden, USPS launched a pilot program in four cities that allows customers to cash checks for up to $500, receiving their money on a prepaid debit card. While the services the pilot provides are extremely limited, this does open up an opportunity for the post office to meaningfully explore the feasibility of postal banking — a service that the Postal Service suspended in the 1960s, and one that could help address the persistent unbanked population in the United States.
As of 2019, 5.4 percent of US households were unbanked, meaning that not a single member of the household had a checking or savings account. While that means that the vast majority of Americans have access to a bank account of some sort, that’s still about 7.1 million households without one. Add to that the number of people who are underbanked — those who may have a checking account but still resort to financial services outside the banking system, like check-cashing or payday loans — and you have over 30 million households that don’t have adequate access to affordable financial services.
That’s why postal banking could have a very positive impact for low-income people. First, it already has the geographic infrastructure to reach Americans across the country; 99 percent of people live within 10 miles of a post office. Banks, on the other hand, don’t have branches in 59 percent of US ZIP codes, meaning some 60 million people live in areas that have post office locations but lack a bank branch. And second, it would provide people with cheaper alternatives to predatory financial services — from banks that require account minimums that are too high to payday lenders who charge exorbitant fees and interest rates — luring more people into the banking system. After all, according to an FDIC study, nearly half of the unbanked population cite not having enough money to meet minimum balance requirements as a reason they don’t have an account. (Thirty percent say that is the main reason.)
If it’s going to bridge that gap, the Postal Service should aim to leverage its advantages — it already has locations and staff across America — to keep the costs of its financial services as low as it feasibly can. As of now, USPS is charging customers $5.95 to cash a check, which, while cheaper than some predatory check-cashing chains, is more expensive in some cases than the service Walmart provides. The problem that postal banking should seek to solve is that it is often expensive to be poor. While rich people not only have free access to their money but get paid interest on their savings, low-income people have to pay relatively high fees in order to access their own money.
The post office’s financial services pilot program is also too small in reach and scope. It’s not nearly expansive enough to let people know that the post office is even offering a new service, which could contribute to the idea that this kind of initiative is not worth investing in, since it’s likely that few people take advantage of it while it’s still around. USPS is also not providing enough services that could begin to show the public what a modern postal banking system in the United States could look like.
So while the pilot is a step in the right direction — one that begins to envision the post office expanding its services rather than downsizing — there’s more work to be done. In the end, USPS is a public service that ought to be provided to Americans regardless of their financial status. And if its financial services are not aimed at being affordable and widespread, then it’s failing its mission to “render postal services in all communities.”
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