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the United States Postal Service is now one step closer to becoming a financial institution.

A white paper was published in January 2014 USPS Office of the Inspector General proposed this by allowing the post office to offer banking servicesit could help communities currently underserved by banks.

Now, a new white paper from the USPS Office of the Inspector General lays out a number of different avenues that would allow the Post Office to enter the banking and financial services sectors.

“The financial services industry is going through a period of tremendous change. Banks are closing branches in communities across the country for many reasons, including the rise of mobile banking and the emergence of new players in the payments space,” the USPS-OIG explains in the white paper.

“This has created a vacuum that prevents many consumers from accessing adequate financial services. More than a quarter of households in this country are either unbanked or have an account, but also rely on alternative finance providers, such as check cashers and payday lenders, who sometimes seek to take advantage of Americans living on the financial fringes,” the report continues.

“The financially ‘underprivileged’ families living in these households tend to be working class and on low incomes,” says the OIG report. “Also, they spend far more time and money tending to simple, everyday things like paying bills or cashing their paychecks than most families. In financial services it is even more expensive to be poor.”

In the white paper, the USPS-OIG proposes five different approaches for the Post’s expansion into the financial services space.

The first is to expand the existing services. “Under its current legal authority, the Postal Service could strengthen and modernize its money orders and international wire transfers, and begin market testing of related services such as bill payment and enhanced check cashing,” the OIG report said. “The impact of this approach on the underserved would likely be less than that of other approaches.”

The OIG report lists each proposal’s relative revenue, relative cost, benefits for underserved and operational complexity on a low-to-high scale, and expansion of existing services is at the bottom of each OIG metric.

The second approach sees the Post establishing “a key partner” to work with as it expands into financial services.

“Financial services could be augmented by a key partner, likely a diversified player offering money transfers, prepaid cards, bill payments and perhaps even credit and deposit accounts,” the OIG report says. “The expertise of the right partner could streamline operations and implementation, but the postal service may have limited flexibility to design and price products to maximize affordability.”

Again, the relative revenue, relative cost, underserved benefits, and operational complexity of this proposal are at the low end of the OIG scale.

The third proposal sees the Post working with “multiple partners” to offer different financial products.

“The postal service could choose a different partner for each product,” says the OIG report. “While working with specialized vendors can result in better and more flexible products, it could make implementation and operations more complex and products less integrated than would be the case with a single partner.”

The relative revenue, relative cost, benefit to underserved and operational complexity of this proposal are all in the middle of the OIG scale, indicating higher revenue, higher cost, higher benefit to underserved and increased operational complexity.

The fourth proposal is for the post office to become a marketplace for financial services.

“The postal service could become a point of distribution for the financial products of a wide range of providers, including banks, credit unions and non-bank financial firms,” ​​says the OIG report. “While this marketplace could scale innovative, consumer-friendly services, a large pool of vendors could operationally challenge the program.”

The relative revenues of this proposal are on the low end of the OIG scale, while the relative costs, benefits to underserved, and operational complexity of this proposal are all at the high end of the OIG scale, with operational complexity at the highest level allowable at the OIG scale.

The fifth and final proposal is for the Post to become a licensed bank itself.

“To make the Postal Service a licensed bank focused on the financially disadvantaged would require a long and probably tedious effort,” the OIG report said. “While a Postbank could significantly advance financial inclusion through deposit accounts and credit, the associated costs and regulatory burdens could make this approach more risky than others.”

The relative revenues, relative costs, benefits to the underserved, and operational complexity of this proposal are all very high on the OIG scale, indicating significantly increased revenues, significantly increased costs, significantly increased benefits to the underserved, and significantly increased operational complexity.

Noting that this is “perhaps the most aggressive” approach the Post could take in this case, the OIG does not recommend this course of action, opting instead to include it in the report to address potential questions about the depth and breadth of the to answer financial services that the post office might offer.

“Starting a postal bank could have the biggest impact on financial inclusion, bringing a significant number of underserved families into the financial mainstream,” the OIG report says.

“As a bank, the Postal Service could take customer deposits and use them to fund loans, giving it maximum opportunity to impact financial inclusion. While the Postal Service offered bank accounts through the historic Postal Savings System (1911 to 1967) and many posts abroad operated as licensed banks, obtaining a new banking license could take many years of painstaking efforts to overcome political, industry, and regulatory obstacles. the OIG report goes on.

“The potential revenue from this approach could be significant. However, should the postal service succeed in becoming a bank, the associated risks, costs and regulatory burdens would pose enormous challenges,” says the OIG report.

“For starters, the Postal Service may need to retrofit offices, hire significant financial expertise, build internal systems across a vast network of branches, raise billions of dollars in capital, and hire a staff of compliance managers,” the OIG said, noting the uncertainties and downsides this approach is “less practicable” than other approaches, at least in the short term.

Click here to read the full USPS-OIG white paper.