The United States Postal Service may expand its financial services beyond money orders and remittances.
“More than a quarter of Americans live partially or completely without access to mainstream financial services and are often forced to rely on costly services like payday loans or check cashing to cover their everyday expenses,” the USPS said on its website, introducing a white paper released Monday by its Office of Inspector General.
The USPS is financially motivated to offer more financial services, saying in the white paper that if it captured just 10% of the current unbanked and underbanked market, it could result in $8.9 billion in new revenue each year.
Possible financial services, according to the paper, could include reloadable prepaid cards, mobile transactions and products that help the underserved take part in e-commerce. They also could include new ways of transferring money both domestically and internationally, and perhaps even include small loans that would help customers overcome unexpected expenses, the report said.
The paper was especially bullish on payment services, because they have the lowest barriers to entry for the USPS, because they are the most similar to what it already offers. Payment services also generally do not require a major capital investment, and are full of opportunities to partner with banks, the report said.
One possible cornerstone product identified by the report was a Postal Service branded open-loop reloadable prepaid card.
“With the development of highly secure identity verification systems and partnerships with government at the local, state, and federal levels, the cards also could send or receive tax payments and refunds, as well as handle other government-to-citizen or citizen-to-government payments,” the report said.
“Such a product would not only help reduce the government costs associated with cash and check payments, it also would help fulfill the goal of bringing the underserved into the mainstream financial fold. The funds on Postal Cards could be covered by the FDIC insurance of a partner bank,” the report added.
The report also suggested offering payday loans that charge a $25 application fee and 25% APR.
Eric Richard, executive vice president of regulatory affairs at CUNA, said credit unions would be open to partnering with the USPS.
“My sense is that credit unions would have happy to explore possible creative partnerships with the Post Service or anyone else who can help bring financial services to more people at less cost. But to the extent that the goal here is more profit for USPS, there could be some problems," he said.
"The field of financial services is already extremely crowded and competitive, and credit unions already provide a cooperative, not-for-profit alternative that benefits consumers, including many who would otherwise be unbanked. This is not an area in which there is a lot of low-hanging fruit that others have not picked," he added.
The move could also help the post office remain relevant in an email world.
“As society becomes increasingly cashless, the Postal Service’s ability to provide a physical link to the new digital economy will become more and more vital,” the report said.
The USPS stressed it doesn't wish to compete with banks or credit unions, saying it could partner with existing financial institutions for some products. The report also said the post office's target market is not actively pursued by financial institutions.