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Can Post Offices Be Bank Branches?

Mercator Advisory Group by Mercator Advisory Group
August 14, 2012
in Analysts Coverage
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The U.S. Post Office used to provide financial services for the unbanked, but skeptics say that offering those services again would not make sense for the Postal Service today. Although political and practical concerns were overcome in the past, the question remains whether those hurdles could be overcome again.

Beginning in 1910, and lasting more than five decades under the authorization of Congress, U.S. post offices offered savings accounts, targeting those who today would be referred to as the unbanked. The government hoped this option would be seen as an attractive alternative to cookie jars and mattresses, which so many people, distrustful of banks, favored at the time-particularly immigrants and the working class.

Deposits peaked at nearly $3.4 billion in 1947-$32.8 billion in today’s money-before a confluence of factors, including higher interest rates available from banks and U.S. savings bonds, sapped the Postal Savings System of its popularity, leading the program to cease operations in 1967.

The Postal Service reported a $5.2 billion loss in its third quarter, so finding new sources of revenue is critical for the agency. The Postal Service struggles with legal constraints that make it hard to adjust its business to keep up with changing times, but even if those constraints were removed, changing technology and societal attitudes will require it to look for new services and revenues to offer. Mercator explored this idea in a blog post on PaymentsJournal.

Click here to read more American Banker.

Click here to read more about the Postal Service’s financial loss.

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