
The Post Office Should Just Become a Bank - nreece
http://www.newrepublic.com/article/116374/postal-service-banking-how-usps-can-save-itself-and-help-poor
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netcan
This is the bones of the argument, I think:

 _Instead of banks, these mostly low-income individuals use check-cashing
stores, pawnshops, payday lenders, and other unscrupulous financial services
providers who gouged their customers to the tune of $89 billion in interest
and fees in 2012, according to the IG report. Post offices could deliver the
same services at a 90 percent discount, saving the average underserved
household over $2,000 a year and still providing the USPS with $8.9 billion in
new annual profits, significantly improving its troubled balance sheet._

I agree with two points: (1) embrace rather than chase away payday lenders.
Part of the reason this sector is so scummy is because of the bad reputation
it carries. Reputable players want to stay out of it. (2) Create simple
financial services (possibly subsidised) aimed at the poor.

But... the idea that they are going to wipe out an industry, cut the revenues
by 90% and make a 100% of the remaining 10% those revenue in profit is
idiotic. The reason payday loans have high interest rates is because they have
a high default rate and they are for small amounts/time, and therefore have
high "transaction costs." It can be improved, but this kind of math is really
stupid.

~~~
NateDad
The fees are not based on risk, they're based on market forces. This
article[0] states the median APR on payday loans is 322%. There's no way
defaults are _that_ bad. The loan shops are just taking advantage of people
who have no other choice, and don't know any better.

[0] [http://consumerist.com/2013/04/26/the-average-payday-loan-
bo...](http://consumerist.com/2013/04/26/the-average-payday-loan-borrower-
spends-more-than-half-the-year-in-debt-to-lender/)

~~~
peteretep
Market forces should correct that via competition, if true.

~~~
jnbiche
Yeah, little problem there. It's almost impossible for non-incumbents to enter
the sector now due to the huge regulatory compliance cost. Between the burden
of Banking Secrecy Act and the challenge of regulatory capture, only very
wealthy individuals and companies can enter the sector. And they have little
incentive to do so, given the sector's schlep factor and poor reputation.

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concerned_user
That is exactly the problem Russian Post is experiencing. It does offer all
sorts of services ranging from money transfers (like Western union but
countrywide only), payments (you can pay your utilities bill ex.), selling
stuff ranging from seeds and plants to bread and sugar. The issues this is
causing: immense queues, mail being delivered FROM Moscow TO Moscow (yes same
city) in 7 days (yes, a week) and it is not uncommon, you are lucky if your
mail makes it in 3 days.

What is amusing that same letter going to, say, Vladivostok will take roughly
same 3-4 days.

Want that post from hell in your country? Go ahead, make it a bank, but it
will be a bank not a post office anymore.

~~~
mschuster91
Germany also has this problem, but in another way: most of the queues
originate from understaffing.

Our postal service also sells china-made headphones, batteries, emergency
birthday gifts and other totally not postal or money-related shit. And I bet
that a huge chunk of the profits originate from the side-selling business,
just like gas stations where the main good (here: gas) is sold as a loss
leader and the real profit is made with the stuff people buy by random...

~~~
concerned_user
Yes biggest part of the problem in russia is that post is understaffed, but
wages are laughable nobody wants to work there, and those that do work there
do not care since there is constant shortage. So quality of service is poor.

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sschueller
The Swiss post[1] office has been offering banking services for a very long
time and I consider them one of the best banking service providers.

If you have only ever used a US bank you have no idea what you are missing.

[1]
[http://en.wikipedia.org/wiki/PostFinance](http://en.wikipedia.org/wiki/PostFinance)

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rm445
UK post offices have been offering banking services for decades, in the form
of savings accounts, current accounts and access to financial services. It has
even entered the argot, with people likely to refer to the concept of cash
savings as 'having a few quid in the post office'.

Please note that it hasn't saved the world, or even prevented post offices
from closing. But it does provide widespread access to banking, both for
people who might otherwise be un-banked and elderly people who might have
trouble travelling to the nearest branch of a high-street bank.

It would seem to run against the grain for the USA, stepping in to an industry
that already has strong private services and competition. As a way to provide
a social good it seems to work reasonably, but isn't the Internet going to
leapfrog the need for most in-person financial services anyway?

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DanBC
The UK had something similar.

Royal Mail was the delivery of postal mail, and the counters at post offices
that did post office services (sold stamps, weighed parcels, did some
government forms, did 'postal orders' etc). They got split out into separate
businesses to allow competition in both spaces while making sure that postal
mail was treated the same on mainland UK.

Part of the PO couters service was to convert some benefit recipients "giros"
into cash. The giros were subject to masssive amounts of fraud and theft. To
solve this PO counters started offering "basic accounts" \- money could be
paid in and benefits would be paid directly into the account. You got an ATM
card with no debt facility at all.

This concept was expanded and all banks now offer something called "basic
accounts" \- these allow BACS transfer but do not allow overdraf at all. They
are fantastically useful.

I have no idea how they're paid for from the banks point of view. No debt and
small account balances means not much bank income. UK banks didn't have much
choice. They are pretty unpopular in the UK and they need to do some better PR
to avoid extra regulation.

There's also a gently rumbling problem of the conflict between "protecting
peoe from fraud" and "allowing people to hae their cash". One of the banks has
been asking people who withdraw a few thousand pounds what it's going to be
used for. Obviously this causes outrage. But then other people clear out tens
of thousands of pounds from six different accounts (including the max
overdraft limit of a business account) because they are he victims of fraud
and the bank fraud control doesn't spot it and those people ask (while
acceptig their responsibility) why the bank didn't step in.

~~~
lostcolony
They're paid for from the fact that the amount of service that needs to be
provided is small, and that in aggregate it could be a decent amount of change
that the bank can choose to invest in low risk sectors, or can turn around to
offer it as a loan with interest.

In general there is money to be made amidst the fluctuations of deposits and
withdrawals, so long as you have additional capital to cover it in case too
many withdrawals happen at once.

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pessimizer
This proposal has been kicked around for years (because the post office once
did this), but seems to be starting to expand in an ugly way. _Speculative
loans_ should not be an element of any USPS banking proposal - USPS should be
a place to keep money and cash checks, not a new opportunity for eventually
privatized graft with federal guarantees. It should just be another government
debt dispenser, not the basis for some new kickback bureaucracy.

Checking accounts don't pay any interest worth discussing - the incentive for
people to use them, an act that carries significant management risk (although
that's been socialized through the FDIC), is because the only alternative is
the mattress.

I'd gladly move my checking to the USPS if they started offering it. It's got
a lot more locations than my credit union.

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_delirium
A relatively minor move could just be to update the traditional money order to
a modern, card-based form.

Traditionally the money-order served as a sort-of equivalent to the personal
check, but not tied to your personal bank account (which means that they
shouldn't bounce, you don't need a bank account in the first place to write
one, you don't give out your bank account number by paying with it, etc.). But
as personal checks get less and less commonly used, the utility of a money
order as a check-like form of payment also declines. The modern personal check
is the debit card, so a modern money order should probably function similarly.

~~~
VLM
"the utility of a money order as a check-like form of payment"

... is extremely high and growing over time with poor people.

People don't pay high M.O. fees because they're ignorant or stubborn but
because they can't open a bank account without having the contents seized
legally (child support, debt collectors, maybe on the run who knows), or more
likely the bank will refuse to open an account and offer then credit (which is
what a checking account is) until they pay off past due debts A, B, and C.

This becomes a problem with the "P.O. is a bank" concept because large
segments of the population need an anonymous payment system of some sort and I
suspect the P.O. will be extremely interested in all your demographic
information especially id documents and postal addresses.

~~~
mschuster91
> because they can't open a bank account without having the contents seized
> legally (child support, debt collectors, maybe on the run who knows)

I have experienced the latter two situations. If you have debt collectors
hunting you, in Germany you can ask for a so-called "P-Konto"
(Pfändungsschutzkonto, a bank account with a certain level that may not be
seized by ANYONE. This amount gets higher e.g. if you have a family). If
you're on the run... well, most banks let you keep your account as long as you
don't manage to let it dry up, because then the notification letters will
bounce.

Also, if you're on the run, remember that cards on your name may get flagged -
if used, cops are silently alerted to arrest you. Or the CCTV footage might be
used for mugshots, or your data mined to predict your behaviour.

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swatkat
India Post offers a whole lot of financial/banking services[1] apart from
usual money orders/transfers; they're very popular too.

[1][http://www.indiapost.gov.in/financial_services.aspx](http://www.indiapost.gov.in/financial_services.aspx)

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jenhsun
Taiwan Post Office has full banking service for a very long time because of
the availability on the scale.

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braum
No it shouldn't.

~~~
techsupporter
Why not?

It's getting quite difficult to live in our society if someone isn't
"perfect." Perfect credit, or virtually everything is more expensive, even
non-credit stuff like insurance; perfect criminal history, so you can forget
getting a job at a lot of companies if you smoked pot or, FSM-forbid, are
released from jail; perfect banking history; perfect social media presence;
and on and on.

The free market isn't willing to address this, so how do we do it as a group?

~~~
JWLong
The free market is perfectly willing to address this. It will do so by
offering them less than minimum wage, once it is allowed to do so. Until then,
"free market" is a misnomer.

~~~
phaet0n
Okay, so how does the "free market" address a growing underclass that can't
afford to live outside poverty? How does the "free market" address social
issues caused as a result of this poverty? Inconveniently, for the "free
market", these people will not go quietly, and when things get really bad,
violence will become an issue. So the "free market" incarcerates them, hoping
they don't reproduce, unless they accept their slavery. Then afterwards,
everyone is happy, living in paradise.

~~~
Yetanfou
Why, the free market already addresses these issues: commercial prison
services, commercial security forces - mostly used outside of the country of
origin, for now - and bail bond companies and and and... a whole industry is
based around services tailored to the growing underclass.

