In 1947, more than 4 million Americans owned $3.4 billion in saving deposits held not by a bank or credit union, but by the United States Postal Service.
It’s a largely forgotten part of American banking (and postal) history that the USPS ran the Postal Savings System for 56 years, from 1911 to 1967. The system held a modest amount of savings for customers at the rate of 2%, and it was especially popular with immigrants who struggled to find honest and reliable banking options in their new society.
Immigrants also favored postal banking for another reason: Similar systems were often in place in their countries of origin. In fact, to this day postal services around the world provide small-scale financial services, from check cashing to savings accounts to e-commerce solutions, such as allowing refunds for returned goods to be deposited directly into a consumer’s postal account.
In September, the Postal Service took the first steps toward restoring its place in Americans’ financial lives: At four East Coast post offices, customers can now get paychecks or business checks worth up to $500 cashed for a flat fee of $5.95. The program, a long-discussed pilot that has the support of both the controversial postmaster general, Louis DeJoy, and the American Postal Workers Union, will load the proceeds onto single-use gift cards that customers can use like debit cards.
These days, the idea of postal banking might feel a bit strange, especially as the service is increasing prices and delivery times as part of a bid to trim its nearly $4 billion deficit. But we shouldn’t let the USPS’s struggles and grimly bureaucratic reputation turn us off from a potentially transformative innovation or, in this case, a return to tradition. Postal banking has the potential to reorient the American financial landscape for the benefit the most vulnerable.
A fifth of Americans are considered “unbanked” or “underbanked,” often relying on unscrupulous payday lenders because they lack the week-to-week security to set even a little aside in a traditional account. According to a 2014 USPS report, in 2012 alone these “alternative financial services” wrung $89 billion in interest and fees out of the poorest Americans. It’s a sin and a scandal. The Postal Service pilot program has the promise to become a safe harbor from these sharks.
Postal banking also has a bipartisan pedigree. While it has most recently been a centerpiece of the progressive platforms of Sen. Bernie Sanders, I-Vt., it has also been promoted by reformist conservatives as a way to get and keep capital in local communities, rather than having it held in the coffers of multinational conglomerates.
And finally, an expansion into basic financial services may be essential to the very survival of the USPS. As Amazon and private shipping companies continue to press their advantage, the Postal Service can press its own: thousands of locations in every nook and cranny of the country, along with broad community trust.
We hope, and expect, that the postal banking pilot program will be deemed a success, and we look forward to the arrival of this new (and old) form of community banking in Western Pennsylvania.
