Banking on (and at) the Post Office

It’s hard to think of an institution more archaic than the U.S. Postal Service. In a sense, it predates even the Declaration of Independence—Benjamin Franklin was named the first Postmaster General a year earlier, in 1775, and the Post Office Department, a Cabinet-level agency, was chartered in 1792. For the record, it’s been quasi-independent since the Postal Reorganization Act of 1971, but it’s still commonly perceived as a government bureaucracy, in part because it has long been dependent on government credit. It is not often associated with innovation, efficiency or even operating profit.

And of course, there’s the core product: mail, which many now describe as snail mail. At a time when even e-mail seems antiquated compared to the many social channels available, who needs a delivery system for all that paper? In the end, who needs it?

Try the financial services industry.

Post Office Man

On first glance, it makes for an odd partnership. We like to be on the cutting edge of innovation, and high-tech tools represent a critical element in that equation. Sure, our industry puts out a lot of paper, and we probably to our part to keep the postal service busy delivering some of it. But that’s about where any connection ends. Many in our field would take it as an insult if our services were described as being anything like the Post Office.

But there might be some changes coming. A brand new report from the Office of the Inspector General of the U.S. Postal Service suggests an interesting form of cooperation, and it is generating considerable buzz.

The report, “Providing Non-Bank Financial Services for the Underserved,” points out that the Post Office, by virtue of its ubiquity alone, is uniquely positioned to Postal Service is well positioned to provide certain categories of financial services to communities around the country whose needs are currently not being met by our industry.

Before delving into what this is, let’s be clear about what it isn’t. The Post Office is not suggesting that it wants to compete with banks in any way, neighborhood or otherwise. Instead, the report proposes that services could include reloadable prepaid cards with money-saving features and mobile capabilities, financial products that assist underserved communities and international money transfers. Moving forward, it could even expand into microfinance, replacing the predatory loan sharks who prey on these neighborhoods and charge obscene rates of interest.

Before descending into snark—and there’s surely rich potential for that—it might be wise to take an alternate look at this scenario. Much of the coverage of the Postal Service’s report focuses on such a move might benefit the institution and the communities it serves. But we should consider what’s in it for us.

This idea is being floated because more than a quarter of the U.S. population has no bank account at all, or have one but still need to rely extensively on check-cashing storefronts, pawnshops and the like. That’s because, to put it bluntly, we’re not there. With our operating model, having a brick-and-mortar outlet in many of these neighborhoods simply doesn’t make fiscal sense. However, while the average “unbanked” family makes about $25,500 a year, it spends nearly 10% of that amount on fees and interest for access to some form of financial services some of it to unscrupulous lenders. Getting into this market won’t just be good for them, it might be good for us, too.

And there’s more. As we’ve documented extensively on this blog, bank branches are shutting down everywhere, a logical outcome of the digital, mobile and cashless economy. But this migration leaves behind vast swathes of the population, and the Post Office isn’t going anywhere. By becoming a physical representation of our digital offerings, it could arguably complement our offerings.

This is not to say it’s going to be easy, and resistance to the idea has already emerged. Some industry groups are decrying the proposal, and the head of the Independent Community Bankers of America memorably described it as the worst idea since the Edsel. However, at least two senators, including Consumer Financial Protection Bureau (CFPB) advocate Sen. Elizabeth Warren, estimate that the U.S.P.S. could make nearly $9 billion a year by proving key services to millions currently left out of the system.

Despite the obvious obstacles, this is an intriguing idea. And in this market, in this environment, that makes it welcome.

Image courtesy of Boians Cho Joo Young/

What We’re Reading: Unbanked, Twitter, BYOD

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.


  • Gruenberg: Cell Phones May Hold Key to Access for Unbanked

American Banker

The Federal Deposit Insurance Corp. plans to issue a report next year exploring whether cell phones could help draw consumers not served by a bank into the mainstream financial system, the agency’s chief said Thursday. “We want to take a hard look at this issue from the perspective of economic inclusion to try to assess what the potential is here in a careful way of using this technology to expand access,” FDIC Chairman Martin Gruenberg said at a conference hosted by the Consumer Federation of America.

Read more 


  • New Twitter Rules Stymie Credit Unions From Promoting Themselves

Credit Union Journal

New rules from Twitter have thrown a wrench in the social media works for some credit unions that want to use promoted posts to break through the clutter and highlight their offerings on the popular social networking site. Peach State FCU entered the social media realm in October with Facebook and Twitter profiles, using promoted posts on each site. (A promoted post pays the site to expose the tweet or post to a larger number of users.) But a recent change to Twitter’s rules sometime in November has shut out some credit unions from using this common business marketing practice. “We had some luck with Twitter in October doing promoted tweets and promoting the account as a whole,” said Meredith Olmstead, founder and social media marketing consultant at Social Stairway, who is serving as a social media consultant for Peach State.

Read more 


  • Mobile Wallet Collaboration Crucial for CU Success

Credit Union Times

A mobile wallet will only be successful if members adopt and consistently use the app to conduct daily transactions. Ultimately, merchants will play a critical role in the success or demise of each mobile wallet solution. Forging mutually beneficial relationships with merchants, navigating the various merchant requirements including point-of-sale technology preferences and negotiating pricing agreements can be a daunting, if not impossible,  feat for an individual credit union to accomplish, regardless of its size or resources.

Read more 


  • NAFCU – Strategic Growth Conference

The Financial Brand

According to data from FindABetterBank, consumers who are specifically interested in mobile banking services are very likely to believe they’ll bank 100% virtually in the future. While fewer banking “traditionalists” (those using checks, for instance) see an all-digital future, it’s still a healthy percentage — nearly two-thirds.

Read more


  • Security and BYOD policy management key barriers to corporate mobile banking


Corporate treasurers cite security challenges and bring-your-own-device business policies as the key obstacles to wider uptake of mobile banking platforms for treasury activities. Of 135 finance and treasury professionals collared by Capital One at the annual Association for Finance Professionals (AFP) gathering, barely one-in-three used a corporate mobile banking platform. Security challenges with sensitive corporate data was cited as the primary barrier to widespread adoption (66%), followed by obstacles for companies figuring out their BYOD policies (24%).

Read more


  • Banks Face Losing To Google And Amazon, While Shortchanging Corporate Clients

Two strong critiques of banking in the Financial Times today. Francisco Gonzalez, CEO of BBVA bank, writes that banks can expect competition from Amazon, Google and Facebook. BBVA is based in Spain but owns BBVA Compass in the U.S. Goonzalez writes that technology has transformed many businesses — next in line is banking. That may come as something of a shock to bankers who think they are on the cutting edge, but Gonzalez points to competitors in providing financial services including PayPal, Square iZettle, SumUp and Dwolla.

Read more 


  • Email Design: Discover Card’s “Statement Available” Message

Net Banker

Most statement alerts are simple one liners asking the user to do all the work: login, find the right tab, click on the correct button, and so on. Discover, on the other hand, positions key summary information right within the body of the email: statement end date, statement balance, credit available, minimum payment due, and due date. The company includes a button to view the statement at the top, but somewhat buries the payment link near the bottom. Analysis: This is one of the better (maybe best) statement-available message I get from the major brands. But it could still be improved

Read more 


New Technologies Are Coming for Unbanked, Underbanked

*This post originally appeared on MyBankTracker

In the past year, countless prepaid cards have flooded the nation to target the large portion of the American population that is either unbanked or underbanked. Acknowledging that the market for these alternative financial products is rapidly growing, more tech companies are catering to this group of consumers.

According to a recent survey by the FDIC, in 2011, 8.2 percent of U.S. households do not have bank accounts, up from 7.6 percent in 2009. And 20.1 percent of U.S. households have bank accounts, but rely on alternative channels for financial services (e.g., check-cashing, payday loans and money orders), up from 18.2 percent in 2009.

Even traditional banks have jumped on the bandwagon to compete against non-bank prepaid-card companies and get a piece of the prepaid-card market.

Last fall, Regions Bank started rolling out asuite of products and services that included a prepaid card and check-cashing and Western Union services. In July, Chase, the largest bank in the country, launched the Liquid prepaid card that does almost everything that a regular Chase checking account can do.

“As banks have steadily inflated the cost of banking, more and more depositors are seeking substitutes for bank accounts with escalating costs, high minimum balances and surprise fees,” said Jim Wells, president of Wellspring Consulting, a firm that specializes in solutions for the unbanked and underbanked.

But, with the proliferation of financial technology, the focus is shifting to serving the unbanked and underbanked through mobile devices.

Last week, at a Finovate conference, two companies demonstrated their versions of a mobile wallet for the unbanked or underbanked consumer.

The CAT (Cash and Transact) mobile wallet, by Emida, is an app that is based solely on the consumer’s smartphone. Through participating retailers, users can refill their CAT accounts with cash (for a convenience fee of $1.50). Then, they can use the funds to pay for purchases through the app.

The Flip mobile wallet, from PreCash, is an app that allows users to perform instant mobile check deposit and make expedited bill payments — two services that were never before available on a prepaid card account.

“Although these mobile-enabled, prepaid card-based accounts are attractive to far more than just low-income consumers, one key to success will be in making the services available via even the simplest of mobile devices,” said Wells.

In countries where financial institutions are hard to come by, mobile devices are the preferred channel for financial transactions. For example, more than 17 million mobile subscribers in Kenya use a mobile-phone-based money transfer service called M-Pesa, which enables users to deposit and withdraw money, pay bills, buy phone minutes and send money to bank accounts or other users.

In the U.S., the decreasing cost of smartphones may make it seem like everyone has a smartphone — but non-smartphones are still the most common mobile devices among the low-income population.

According to the Federal Reserve, 64 percent of the unbanked have access to a mobile phone (18 percent have a smartphone) while 91 percent of the underbanked have access to a mobile phone (57 percent have a smartphone).

Regardless of the types of mobile devices, the demand for alternative financial products and services is there.

And, history tells us that unbanked and underbanked consumers could be the users of the next wave of financial innovation.

In last year’s fall Finovate conference, card-linked offers made regular appearances on stage. Since then, card-linked offers became more available to bank customers. Bank of America, Capital One, American Express and many other financial institutions began providing card-linked deals.

Considering that the conference offers a good idea of what products and services we’ll see in the near future, it wouldn’t be a surprise to find that, by this time next year, there are more prepaid card accounts and other financial services that live on mobile devices.

 What are you offering your customers? Let us know in the comments below!