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
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