It has been nearly three years since the postal banking pilot program had a customer (Table 1). It’s time for Congress to step in and put this program to rest.
What is the Postal Banking Pilot Program?
For anyone wondering, “What is the postal banking pilot program?” here’s a brief breakdown to get you up to speed. The United States Postal Service (USPS) offered banking services up until 1966. It was largely discontinued because the service wasn’t popular. More recently, however, people have been calling for a return to postal banking. The argument is that having the government provide bank accounts would help the millions of Americans who do not have accounts.
The USPS needs Congress to sign off on such a radical change, and there’s little sign of that happening. So, the USPS did the next worst thing: it exploited past expansions of its authority to create the postal banking pilot program. Almost overnight, the USPS launched the new program in four cities. People could now bring in their payroll checks and get them loaded onto prepaid gift cards, albeit for a fee of $5.95 and a daily limit of $500.
Doomed from the Start
Over the years, I’ve been skeptical of proposals for postal banking. The idea that the post office could be a solution for financial inclusion doesn’t add up.
Proponents have argued that the widespread nature of post offices will help because banks don’t have physical locations as much as they used to. Yet, the Americans who don’t have bank accounts routinely rate inconvenient hours and locations as their least pressing concerns. Proponents also say that the post office would offer better prices than the private sector because it doesn’t factor in making a profit. Yet, the prices for the postal banking pilot program exceed those of alternatives like Check Cash Depot and Walmart (Figure 1).
Conclusion
The USPS has said there’s nothing to worry about. It argues that the program costs nothing because there have not been any customers. Congress should not take this argument as a reason for relief. It’s time to put this program to rest.
Congress should remove the postal banking loophole by amending the Postal Accountability and Enhancement Act to specifically prohibit the USPS from engaging in new financial services without congressional approval. Otherwise, mission creep at the USPS may become a never-ending story.