For the more than 7 million people in the United States who don't have access to banking services, it can be difficult to live a modern life without a bank account. While financial apps like Paypal and Venmo have expanded our financial options, it's still extremely challenging (and expensive) to live without at least one basic checking account, and it's very hard to save money without a savings account that pays some kind of interest. The United States Postal Service (USPS) has quietly started to offer a handful of new or improved financial services in four cities, which could be the first step towards a return to postal banking. This could help rescue the agency's finances and help millions of people who have limited or no access to the banking system.
Tatiana Roy, a USPS spokeswoman, said in an email that the pilot program, a collaboration between the USPS and the U. S. Postal Workers Union, began in September. The new services include check cashing, bill payment, access to cash machines, enhanced and improved money orders, and expanded bank transfers.
Mark Dimondstein, president of the United States Postal Workers Union, said that this test was a small step in a very positive direction. Many people don't have easy access to banks, but most can find a post office. According to a study published in May by the University of Michigan, census tracts with post offices representing 60 million people do not have community bank branches. The lack of access, the costs associated with banking, and distrust in the banking system have also discouraged some people from using banks, leaving them completely out of the system.
About 8.4 million households (or 6.5 percent of households in the United States) are underbanked, meaning they can have checking or savings accounts but also use financial products and services outside the banking system such as payday lenders. With 1 in 4 American households having no access to banking services or insufficient banking services, postal banking advocates see an enormous opportunity for the USPS to provide access to an essential financial system while strengthening their own economic position. However, there are critics and skeptics. Paul Merski, vice president of congressional relations and strategy for Independent Community Bankers of America (a small bank trade group), emphasized that the USPS has provided nothing more than a few simple financial services in nearly 55 years.
Some fear that Postmaster General Louis DeJoy will not fully support the pilot program and could undermine efforts to expand it even further. Many USPS advocates have expressed their lack of faith in DeJoy due to his close ties to former President Donald Trump and the Republican donor class as well as his efforts to make the USPS more business-oriented. Porter McConnell, co-founder of the Save the Post Office Coalition disagreed with the small size of the pilot program and with the decision to test it only in major urban areas rather than rural communities that most lack such services. However, a new more permanent postal banking program is outside the purview of the postmaster general.
Democrats in both chambers of Congress including progressives have recently promoted legislation that would reinstate postal banking. Larger pilot programs have also been included in recent appropriation bills. In postal banking your local post office offers some basic financial services just like a commercial bank. You don't need to have a reuse of the post office to provide financial services as financial services have never been more complex.
Until now USPS testing programs are only conducted in urban locations and only at one post office per zip code. For example, the only indication of the gift card option at participating post offices is a small sign in the window no larger than an index card. Being able to go to a post office for small loans could end your dependence on high-cost alternatives such as payday lenders. Post offices don't offer all these services on a large scale although they can sell money orders which is practical for people who need to pay a bill or want to send money securely to someone but don't have a checking account.
But when Jonathan Smith president of the New York Metropolitan Area Postal Union (the largest APWU location in the country) was asked to recommend Bronx postal locations for testing USPS established criteria as low-crime areas. While 9.4 percent of New York City households don't have a bank account in The Bronx that figure nearly doubles to 17.7 percent. By mid-1960s deposits in Postal Savings System had dropped considerably and in 1966 USPS stopped accepting deposits. In addition Baychester's largest housing complex known as Co-op City already has two post offices serving it.
While postal banking has gained some strength in Congress in recent years it still faces significant opposition from banking industry. When USPS launched trial program in September that allowed people with business or payroll checks to load them onto gift cards at four neighborhood post offices it was considered primitive precursor to postal banking system. But Baychester Station is located in Northeast Bronx where according to Federal Deposit Insurance Corporation (FDIC) survey 17 percent of households are unbanked or underbanked. Postal banking could be great way for those who don't have access or can't afford traditional banks' fees and minimum balance requirements.