Raise the Hammer
Postal Banking will promote financial inclusion and address the problems many communities and individuals in this country have with getting access to banking services.
By Bob Wood
Published December 02, 2013
Good communities provide residents and businesses with easy access to reasonably priced financial services. Such access is eroding in Canada.
The big five chartered banks have been exiting downtown cores of major Canadian cities for years. Many small communities, especially aboriginal communities, have no banks or credit unions at all. Moreover, fees are an issue. Only thirty years ago, banks did not charge fees but now these charges are amongst the highest in the world.
"Fringe" financial institutions like Money Mart and the Cash Store have stepped in to fill the void and make big bucks while charging exorbitant fees. (There are now at last count 20 of these institutions in Hamilton.)
There is some regulation of these fringe institutions. In 2008, for example, the Ontario government, concerned about excessive charges, brought in regulations. These controls were inadequate so the government is in the process of setting new rules.
Meanwhile many Canadians don't have bank accounts. How many? According to a recent report from the Canadian Centre for Policy Alternatives (CCPA), three to fifteen percent of Canadians do not have a bank account. That means at least 910,000 Canadians are "unbanked."
The solution to this problem (and others) is to bring back postal banking. That is what John Anderson argues in a comprehensive paper called Why Canada Needs Postal Banking.
Canadians had access to Postal Banking for more than one hundred years. When the Post Office Savings Bank ceased operations in 1968, nearly 300,000 accounts closed down. At its peak in 1908, deposits in the bank totaled $47.5 million (equivalent to $1 billion in today's money).
Meanwhile postal banking is thriving in other parts of the world. Japan Post Bank, for example, has $2 trillion in assets.
Systems in Great Britain, France, Italy, Switzerland and New Zealand are examined in Anderson's paper. The models are all a bit different from each other. What is common, though, is they are all successful. They are:
Popular: In New Zealand when Kiwibank opened in 2002 thirteen percent of the NZ population opened accounts.
Financially viable: The postal banks studied by Anderson were financially successful. All had substantial gains in revenues and profits. Seventy one percent of the profits of Switzerland's Swiss Post came from postal services.
Achieving stated social goals that other financial institutions weren't particularly interested in. Banque Postale in France, for example, is mandated to open accounts to everyone without any sort of discrimination. This bank provides "a dedicated special products range and support packages for vulnerable customers."
Canada Post (CP) is in trouble. A report [PDF] from the Conference Board of Canada, commissioned by Canada Post, stated:
Canadians sent one billion fewer letters in 2012 than they did in 2006. This, understandably, creates significant challenges for Canada Post moving forward, as it is projected to lose $1 billion a year by 2020.
That report generated a number of ideas to address this challenge. Service standard reductions, price increases, wage restraint and more but, apparently, no exploration of a move into the area of postal banking.
The Canadian Union of Postal Workers (CUPW) is organizing on this issue. However, the issue seems to be flying under the radar. CUPW list six good reasons why Canada Post should adopt postal banking. Here is a summary:
CP could make money and increase their ability to invest in public postal service and jobs.
People in communities that do not have banks will gain access to bank¬ing services.
Basic financial services, like credit, will be available with¬out exorbitant fees charged by payday loan companies.
Small businesses and groups will gain access to financial services in their commun¬ities and help stimulate local economies.
CP could diversify like other post offices around the world and leave the corporation less dependent on mail.
It would provide meaningful work and new and interesting jobs for CUPW workers.
Find out more about the CUPW campaign at http://www.cupw.ca/index.cfm/ciid/12820/laid/1.htm.
Giving all Canadians easy access to reasonably priced financial services is a good enough reason on its own to embrace postal banking.
The Universal Postal Union (UPU) confirms this. Established in 1874, the UPU is the second oldest international organization worldwide. Made up of 192 member countries its website claims "the UPU is the primary forum for cooperation between postal sector players."
The UPU produced a report on postal banking in 2013. The study showed:
After banks, postal operators and their postal financial subsidiaries are the second biggest world-wide contributor to financial inclusion, far ahead of micro¬finance institutions, money-transfer or¬ganizations, cooperatives, insurance com¬panies, mobile money operators and all other providers of financial services.
Postal banking is an idea whose time has come - again. a
By adrian (registered) | Posted December 02, 2013 at 13:46:30
Interesting article, but there's one important thing missing: an explanation for what postal banking is. What is it, how does it work and how is it different than regular banking? I have no idea and the Wikipedia on the subject didn't enlighten me.
By bobwood (registered) | Posted December 03, 2013 at 17:10:53 in reply to Comment 95411
I think the report from the Canadian Centre for Policy Alternatives cited above does a good job of answering your question. Bob
By Tybalt (registered) | Posted December 03, 2013 at 16:45:26 in reply to Comment 95411
Canada Post doesn't even have retail outlets anymore. I simply can't see how a postal banking system can work with no post offices.
By kevlahan (registered) | Posted December 02, 2013 at 14:13:40 in reply to Comment 95411
In the UK and France (at least), the post office runs a banking service in addition to mail and parcel delivery. They leverage their network of post offices and website to provide the banking services. Because they are publicly owned (for now), they have a mandate to provide service to all at reasonable prices. They often also provide banking services to community organizations and specialize in government-backed savings programs and loans. The bill payment service run by Canada Post is a form of financial service.
As the article points out, a government-run service would fill an obvious gap in the market that is now being filled by pay-day loan organizations, at great cost to their customers. It could also broaden the role of Canada Post.
Part of the problem in Canada is that the post office has already shut down most of its own post offices, and it is hard to imagine banking services being run at the post office counters in corner stores and pharmacies!
The French Banque Postale has a good summary of its mission at https://www.labanquepostale.fr/groupe/En...
"Second major challenge: the individual risk of banking exclusion, increased further by a tense and unstable economic environment. To meet this challenge, we are receptive to all customers, regardless of their financial situation: we are the only bank that is recognised in law to have a mission to increase access to banking for everyone and to prevent the risk of overindebtedness. In 2012, together with eight major associations, we set up a think tank initiative to combat banking exclusion.
Third challenge: the difficulties encountered by an increasing number of low-income households to access home ownership. We have set up a dedicated unit for access to social home ownership: in partnership with stakeholders in social housing, we are developing innovative acquisition solutions, backed up by safety nets for borrowers.
Fourth challenge: unequal opportunity which often penalises young people from low-income urban and rural households. We set up L’Envol, La Banque Postale’s campus, to identify talented young students and to access high-level education. "
Comment edited by kevlahan on 2013-12-02 14:29:24
By InsideJob (registered) | Posted December 02, 2013 at 17:00:48
Aren't you tired of banks viewing seven-year-old credit transactions as bellweathers for your current financial situation? Tired of banks hanging on to cash or government cheques to bounce your own, while they're already using your money? Tired of being rug-ranked by bank staff because of your disability or other barriers? I bet Ontario's credit unions would welcome receiving customers without the onerous share purchases being a barrier to new immigrants or beginning workers. Perhaps these "found" customers would graduate to share purchases and full credit union services if encouraged to get on their feet through "postal" banking at these locations. Bravo, Bob Wood!
By Plus Ca Change (anonymous) | Posted December 02, 2013 at 21:48:42
Canada Post money orders carry a transaction fee of $7 per MO; Scotiabank, RBC and CIBC all charge a $7.50 per-transaction premium for the same service.
By PearlStreet (registered) | Posted December 02, 2013 at 23:19:05
Are you a medonite?
By Selway (registered) | Posted December 02, 2013 at 23:58:25
This is a very good idea. But more detail on the mechanics would be helpful. How would it work at the drug-store and variety store postal outlets?
By bobwood (registered) | Posted December 03, 2013 at 17:17:23 in reply to Comment 95433
The Canadian Centre for Policy Alternatives' report cited above indicates other countries have many such outlets. I'm not sure if the details of how they work are clear from the report though.
In theory, though, I would think they could offer whatever specific services it is determined the Postal Bank would offer.
Bob
By Hipgnosis (anonymous) | Posted December 03, 2013 at 00:19:17
Another good argument for this is that in 2 years the govt is phasing out payment by cheque. If you don't have a bank account you don't get paid. No GST, CCTB, UCCB, CPP, OAS.... This could be the solution for those who can't or don't want a traditional bank account.
By Mother of Invention (anonymous) | Posted December 03, 2013 at 06:34:21
http://www.theglobeandmail.com/news/national/canada-post-books-2011-loss-of-327-million-after-16-years-of-profit/article4103913/
http://www.ctvnews.ca/canada/canada-post-cuts-likely-as-crown-corporation-faces-327m-operating-loss-1.1156171
http://www.cupw-vancouver.org/index.php?option=com_content&view=article&id=612:canada-post-under-attack-from-within&catid=34:bulletins&Itemid=55
By Love Bc (anonymous) | Posted December 03, 2013 at 19:35:07
@ Hipgnosis, you have an excellent point - this coming from a postal worker.
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