Ever since the inspector general of the U.S. Postal Service authored a
endorsing the concept of postal banking, more advocates and
policymakers have become intrigued.
:
Dozens of countries offer simple financial services through their posts, and
here in America, Postal Savings Accounts served millions of customers from
1911-1967 (the post office still sells money orders today). But it could also
fix a number of our current problems simultaneously, even ones you haven’t
thought about. Here are 10 different applications of postal banking, in order
from most to least obvious:
. The most recent
data from the Federal Deposit Insurance Corporation shows that about 10 million
households are “unbanked,” with no access to traditional financial services.
Another 24 million are “underbanked,” meaning they have a bank account but still
use alternative services like check cashing stores, pawnbrokers or payday
lenders. The unbanked and underbanked represent over one in
households in the U.S. In many cases they literally can’t find a bank in their
communities; 93 percent of all bank branch closings since 2008 have come in ZIP
codes where the average household income is below the median level. By offering
basic financial services – an ATM card, an interest-bearing savings account,
even potentially small loans – the Postal Service can give millions stable
access to banking, a critical component of our modern society. Try renting a
car, obtaining health insurance on healthcare.gov or even getting a job without
a bank account.
. Unbanked and
underbanked Americans pay a hefty price for their lack of access. According to
the Postal Service IG report, the average household spends $2,412 a
on interest and fees for alternative financial services. This is
about one-tenth of their gross income, going right into the corporate accounts
of unscrupulous and predatory operations. If the post office can deliver these
services at a dramatic discount, they could save families thousands of dollars,
and drive the conglomerates that prey on these communities out of business. Not
only does this fit with the regulatory imperative of protecting Americans from
financial abuse, it gives them breathing room to pay for necessities, putting
the money back into the economy. People who filed for bankruptcy in 2012 were
just $26 a month short of meeting their expenses. Discounted financial services
could fill that gap, lifting many Americans out of desperation and stretching
their income.
3)
Stabilizing the Postal Service. We should be careful with trying
to balance the books of the post office on the backs of the working poor. But
the good news is that the Postal Service’s finances are not as dire as
advertised – most of the recent shortfall comes from them having to
pre-fund
retirement benefits 75 years out, something no public agency or private
business has to do – and the modest income earned from basic banking services
can merely help keep them flush. It’s a far better alternative than
mass
layoffs and branch closures at the nation’s second-largest civilian
employer, which allows hundreds of thousands of families a union job and a
ladder into the middle class. Post offices already have the critical physical
infrastructure to serve these communities – 58 percent of their branches are in
ZIP codes with one bank branch or fewer. Offering banking will ensure the Postal
Service keeps those branches and survives long into the future.
4)
A better way to deliver federal benefits. Did you know that
Social Security benefits no longer get distributed via check? State and federal
agencies, to save money and promote convenience, have started to deliver
benefits through direct deposit, or for those without a bank account, through
electronic benefits transfers (EBT) onto debit cards. Predictably, big banks
pick up
this business and charge high fees for beneficiaries to access food stamps
or unemployment insurance. With postal banking, federal benefits could get
loaded onto Postal ATM Cards at no additional cost, saving the government and
beneficiaries money. Moreover, the unbanked would have an easy way to access
their benefits.
5)
A savings vehicle for the poor. President Obama tried to address
the problem of inadequate savings for retirement with myRA, a savings system
deducted from paychecks that earns a modest rate of return without risk of loss.
I’ve
written about how myRA doesn’t really do much
to solve the retirement crisis. More important, myRA accounts over $15,000 must
get rolled over into a Roth IRA, subjecting that money to the vicissitudes of
the market and the Wall Street financial advisers who charge exorbitant fees for
the privilege. The Postal Service could offer the exact same savings account as
myRA, without having to roll it over. This at least promotes savings that could
be used in an emergency or as a modest aid in retirement.
6)
Bringing immigrants into society. Historical data shows that the
old Postal Savings System was most popular with recent immigrants, who had
experience doing their banking at postal branches in their countries. Currently,
immigrants take advantage of the post office for money orders and “
Dinero
Seguro,” an electronic money transfer service to nine Latin American
countries. Adding postal banking could really cater to these communities by
hooking up with other global postal systems. The International Financial System
of the Universal Postal Union includes over 60 countries, making it simple and
cheap to transfer funds electronically from one country to another.
International money transfers from the U.S. rose to $51 billion in 2012, and the
Postal Service is well-positioned to facilitate this. Immigrants using a
government agency could bring them closer into U.S. society and ease the
hardships of our immigration system.
7)
Preventing identity fraud. The recent data breaches at Target
have revealed a
shocking
truth – America has the worst payment security system in the world, and as a
result, over half of the world’s identity theft happens here. Unlike most
developed countries, U.S. credit and debit cards have a magnetic stripe, instead
of the more secure “chip-and-PIN” system (where cards have a microchip in them,
and customers have to use a PIN number at the point of sale). If you read the
excuses
from major banks about why they haven’t upgraded this outdated system,
you’ll see a lot of finger-pointing at retailers who don’t have the proper card
readers. In reality, banks just don’t want to pay for the upgrade of issuing new
cards and the
customer service of dealing with forgotten PIN
numbers. The Postal Service, with no old debit cards to retire, could
immediately use chip-and-PIN systems and force the upgrade the country
needs.
8)
Modernizing the payment system. Hey, forget credit and debit
cards; that’s old technology. Countries like Kenya have
successfully
experimented with mobile payments, making transferring money as simple as
sending a text message. Benefiting from starting from scratch, the Postal
Service could integrate accounts with mobile seamlessly, enabling convenient
payments through smartphones for everything from utility bills to the corner
store. Our current payment system is
slow;
it takes days for a check or debit card transaction to clear when with mobile
payments it could take minutes, and banks
refuse to upgrade the
system (notice a pattern?). The Postal Service could serve as the backbone for a
new system that would improve payments for individuals and small businesses.
9)
Safeguarding personal data. Like every other business in America,
banks sell your personal information to advertisers and use your data as a
profit center. This is one way that predatory lenders target low-income
communities, finding their leads through personal financial data. With postal
banking, your information is likely to be
protected by the
Privacy Act of 1974, which applies to all government agencies. This would be
perhaps the first legitimate halt to the mass big data grab that infects
practically everything we do these days, and it would help prevent deceptive
credit practices by denying crooked businesses the information they need to
target people.
10)
Ending recessions. Truly. Postal banking would integrate well
with the concept of giving everyone with a Social Security number an ATM
account
with the Federal Reserve, instead of intermediating it through a commercial
bank. The physical ATMs could be at any of the 35,000 postal branches nationwide
(or through their mobile-enabled postal account). Rajiv Sehti, an economics
professor at Barnard College and Columbia University,
explains
that this would allow the Fed to directly target economic downturns. When the
economy lags, the Fed could place a few hundred dollars in everyone’s account,
with the proviso that it gets spent immediately. That would offer an immediate
and timely Keynesian stimulus, paid for by normal Fed operations (the Fed made
$79.5 billion last year alone). Conducting monetary policy this way would do a
lot more to help Main Street than the current quantitative easing, which raises
asset prices and helps mostly the wealthy.
This menu of possibilities for postal banking makes it extremely attractive,
along with the fact that, according to the inspector general report, the Postal
Service may explore it under its existing authority, rather than having to hope
for an act of Congress. The
Postal
Service Board of Governors can begin this process tomorrow by starting some
pilot programs. New
Board
of Governors nominee Vicki Kennedy (Ted’s widow) can follow in her family’s
footsteps by improving the lives of millions of ordinary Americans through
postal banking, the Swiss army knife of public policy.
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