Banking at the Post Office May Be Making a Comeback

Photo of the words &quot;United States Post Office&quot; engraved in a stone building facade

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The U.S. Postal Service began offering expanded financial services in a handful of cities last fall, a potential first step toward a return to postal banking. In a pilot program, select Postal Service locations in four cities—Washington, D.C.; Falls Church, Va.; Baltimore; and the Bronx, in New York City—are offering services including check cashing, bill paying, ATM access, and expanded money orders and wire transfers. For example, customers can cash payroll or business checks of up to $500 and put the money onto a gift card.

According to the Federal Reserve, about 63 million Americans are under- or unbanked, meaning they do not have regular access to commercial banking and instead typically rely on high-fee options such as check-cashing outlets, money orders and prepaid cards. The USPS, which has more than 34,000 locations, could help close that gap. Advocates for postal banking see an opportunity for the Postal Service to provide access to an essential financial system while bolstering its own economic position. The USPS Office of the Inspector General reported that fees for financial services, even if set at a low cost, would bring in nearly $9 billion a year if 10% of those who are currently underbanked use the service.

Fintech: The Bank Disrupters

It would require an act of Congress to reestablish postal banking beyond the services available in the pilot program. Progressive members of Congress have supported legislation that would reestablish postal banking. For example, Sen. Kirsten Gillibrand (D-N.Y.) has proposed the Postal Banking Act, legislation that would create a postal bank to provide low-cost basic financial services to people who do not have access, or have limited access, to America’s banking system. But Sen. Ted Cruz (R-Texas) and 18 Senate colleagues recently signed a letter opposing the idea.

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The idea of banking at the post office isn’t new: Congress passed legislation to establish the Postal Savings System in 1910. It was designed to encourage working people and immigrants to use the banking system. The program started in 1911, and by 1947, deposits in the system had peaked at $3.4 billion. In the 1960s, deposits declined as more consumers turned to banks. In 1966, the Postal Service began to phase out the program.