More than a quarter of households in this country either don’t have a bank account, or have an account but also rely on often expensive alternative financial services like check cashing and payday lending. These underserved households are looking for more affordable options, and the U.S. Postal Service may be able to help. In a January 2014 white paper titled Providing Non-Bank Financial Services for the Underserved, the Postal Service Office of Inspector General (OIG) explored how postal financial services could save Americans time and money, help banks and other businesses connect with customers, and create new revenue for the Postal Service. In a new follow-up paper titled The Road Ahead for Postal Financial Services, the OIG assesses potential approaches the Postal Service could take for expanding the financial services it offers.
The Postal Service already has a major presence in the financial services market, as it is the largest single provider of paper money orders — the most widely used alternative financial service in the United States. In fiscal year 2014, it sold 97 million money orders with a face value of $21 billion. Through its unmatched nationwide retail network, the Postal Service also offers international money transfers, prepaid gift cards, and limited check cashing. The 13 million people who use these products — many of whom are regulars who come in every month — could be a ready-made customer base for new postal financial services.
Under its current legal authority, the Postal Service may be able to expand into new products related to its existing offerings. This may include payroll check cashing, domestic money transfers between post offices, bill payment services, international money transfers to additional countries, and other affordable products. Working with financial consultancy Mercator Advisory Group, the OIG estimates that a suite of expanded financial services based on what the Postal Service may be able to offer under current law could bring in $1.1 billion in annual revenue after a 5-year ramp up, while covering costs and contributing to profits. The Road Ahead for Postal Financial Services describes this and other approaches for expanded postal financial services, some of which are more complex and involve products that are likely beyond the Postal Service’s current legal authority.