Who doesn’t want the USPS to bring banking back to the post office?

Could the USPS be the next big bank?
Could the USPS be the next big bank?
Image: AP Photo/The Republic, Joel Philippsen
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As the United States Post Office continues to be plagued by shipping delays and increased prices, agency officials are looking for ways to boost revenue and ensure financial stability. And that’s why, for the third time since 2008, there is serious talk about providing banking services at the post office.

Only this time, it’s actually happening—at least as part of a small pilot program to offer paycheck cashing. As an alternative to payday lenders that often charge a hefty percentage, customers can pay a reasonable flat fee to redeem their paychecks for Visa gift cards of up to $500.

Right now the service is available at only four of the USPS’s 31,000-plus locations—in Baltimore, Maryland; the Bronx, New York; Falls Church, Virginia; and Washington DC. Eventually, the trial will expand to include bill-paying services and access to ATMs. But even the mere existence of the pilot program is exciting for proponents of postal bank services, which were commonplace in the first half of the last century.

“It’s the first real step toward reviving postal banking since the program was terminated back in the 1960s,” notes Christopher Shaw, a historian and author of Money, Power, and the People: The American Struggle to Make Banking Democratic.

A 2014 report from the USPS Inspector General’s office found that postal banking could generate up to $9 billion in annual revenue. US senator Kirsten Gillibrand of New York, argued earlier this year that offering banking services at USPS retail locations could be the answer to the agency’s financial issues while also alleviating the financial burdens on households beholden to predatory payday lenders. She and senator Bernie Sanders of Vermont introduced the Postal Banking Act (pdf) in 2020 in a bid to help the estimated 7.1 million unbanked US households obtain services such as checking accounts and low-fee ATMs.

There is research and precedent that shows postal banking can provide financial services to low-income Americans, help fund the USPS, and alleviate financial burdens for unbanked households. So why isn’t the USPS already a bank?

Who opposes postal banking?

Banks and bankers 

Strong opposition to postal banking comes from banks and bankers themselves. Since the US Congress established the Postal Savings System in 1910, banks have been vocal critics of postal banking, resisting moves to expand the program. By the 1960s, use of the services had waned and the lobbies of various groups of banks and savings-and-loan associations were able to get rid of it, Shaw says.

“There wasn’t any organized movement to defend it anymore, as had existed for all those decades. And so at that point, the politics were in favor of the banking lobby,” he says.

Organizations such as the Independent Community Bankers Association have been vocally opposed to efforts to revive postal banking. A spokesperson for the trade group tells Quartz that complex financial services offerings are best provided “in a competitive, private, and free marketplace that openly and efficiently benefits customers.”

A spokesman for the American Bankers Association, meanwhile, says that the solution to high check-cashing fees is a “banking relationship,” not “a government-subsidized service through the post office.”

The check-cashing industry

The industry most threatened by postal banking is the $18.2B check-cashing and payday loan industry. There are thousands of these storefronts around the United States that cash checks without the customer needing a bank account. Some of these businesses also offer payday loans, a practice often considered a predatory practice based on the high interest of the loans and the typically low incomes of the customers targeted by these businesses.

Under the Trump administration, the US rolled back regulations on predatory payday lenders, an issue postal banking would address within its range of services. At the four USPS pilot program locations, customers are charged a fee of $5.95 per check up to $500, a number Shaw says is lower than most check-cashing services.

Congressional Republicans

Historically, postal banking has been an issue popular among progressive Democrats. Contemporary proponents of postal banking include the aforementioned Sanders as well as Congressional representatives Alexandria Ocasio-Cortez of New York, Marcy Kaptur of Ohio, and Bill Pascrell of New Jersey.

Republicans haven’t been as supportive. In 2014, Republican congressional representative Darrell Issa of California spoke out against postal banking, arguing that USPS workers are not equipped to handle financial services above money orders, a service the agency has long provided. In 2020, a provision to test a pilot program for USPS financial services was dropped by the Republican-controlled Senate.

In response to the current USPS pilot program, Republican Senator Pat Toomey of Pennsylvania said, “[Y]ou have to work very hard to come up with a worse idea than having the government become a national bank executed through the post office.”

Shaw, however, does not anticipate this issue being a strictly partisan one.“There is actually a decent amount of support for the postal service amongst Republicans, especially ones who represent a rural district because the postal service is so important in rural America,” he says.

Rural customers also are supposed to be key beneficiaries of expanded USPS banking services, but the pilot program so far only involves post offices in densely populated areas. The American Postal Workers Union, which worked with the USPS to set up the pilot, has recommended expanding it to a rural area, Government Executive reports