Can Postal Service Stay Alive By Cashing Checks & Selling Prepaid Debit Cards?

The once-great US Postal Service continues to sink into obscurity and financial oblivion, a destiny that will probably not be saved by all the postage stamp price increases in the world. But could the USPS keep its head above water by offering the financial services that are generally reserved for run-down strip malls?

Yesterday, the Postal Service Office of Inspector General issued a white paper [PDF] suggesting that maybe the USPS could make money by offering financial services to America’s unbanked and under-banked.

“Millions of Americans do not have a bank account, or use costly services like payday loans and check cashing exchanges just to make ends meet,” reads the report. “The entire underserved population comprises more than a quarter of all U.S. households — some 68 million adults. They are an economically diverse
mix of working and middle class families, poor and unemployed people hurt by the recent economic crisis, young people, immigrants, and others who are trying to
make it paycheck to paycheck. Together, they represent a huge market. In 2012, they spent about $89 billion just on interest and fees for alternative financial services.”

The white paper contends that USPS, more than most businesses, is in a position to help these people while earning much-needed revenue. Given that the Postal Service is financially tapped, the Inspector General’s office is not suggesting that it become bank, but that it partner with banks to offer their services to a class of consumers they aren’t currently serving.

“The Postal Service could help financial institutions fill the gaps in their efforts to reach the underserved,” explains the report. “While banks are closing branches all over the country, mostly in low-income areas like rural communities and inner cities, the physical postal network is ubiquitous. The Postal Service also is among the most trusted companies in America, and trust is a critical element for implementing financial services.”

It points to national mail services in other parts of the world that already sell financial services to consumers as evidence that this is not such an outlandish idea.

Among the services USPS could offer, suggests the white paper, are reloadable prepaid cards, check-cashing, wire transfers of money internationally and domestically, and small-dollar loans (hopefully at non-payday loan interest rates).

In all, the white paper concludes that USPS could cash in to the tune of $8.9 billion a year.