Postal Networks: a Physical Link to the Digital Economy
I was pleasantly surprised to read the latest White Paper from the U.S. Postal Service exploring the potential to build on its existing financial services products to help the poor access financial services in the United States. It is no surprise, however, that the U.S. Post should look to serving the estimated 68 million people who are underserved with formal banking services as one approach to address its ailing financial situation. At one point the only government agency that was profit making, the U.S. Post has been on a financial decline for the past seven years, struggling to keep up with the pace of change in the mail/shipping industry as we shift to a digital world. The White Paper sets up the potential “sweet spot” for the Post as the agent that helps people bridge the digital divide. The paper notes: “As society becomes increasingly cashless, the Postal Service’s ability to provide a physical link to the new digital economy will become more and more vital…”
Most arguments for supporting the postal networks’ role in advancing financial inclusion stem from their existing role in serving the poor. As elsewhere, the White Paper highlights the fact that poor people in the U.S. already use postal services and trust the Post more than any other institution. Indeed, global evidence supports this claim according to a recent publication jointly authored by the Universal Postal Union and the World Bank’s Findex. Evidence on account ownership comparing post offices and traditional financial institutions from 60 countries confirms that the profile of account holders at the post offices in comparison with traditional financial institutions are more likely to be from financially vulnerable groups, such as the poor, less educated, and those out of the labor force. In the case of the U.S. where postal accounts were closed out in 1967, the post provides users access to other financial services such as money orders and international remittances and could easily expand into pre-paid cards, mobile transactions, and products that link the poor to e-commerce. Confidence in the U.S. Postal Service far outstrips public sentiment toward the commercial banking sector. The White Paper notes:
“[A] recent market survey found that 68 percent of respondents agree or strongly agree that the Postal Service is reliable and trustworthy. When it comes to privacy, the Postal Service is consistently ranked as the most trusted federal entity, and was recently identified as the fourth most trusted company in the United States.”
The White Paper takes a cautious position as to the Post’s role: it focuses on how the U.S. Post will partner with commercial players rather than displace them. In an environment where any encroachment of public institutions into the private space generates a lot of backlash this is a wise approach. Indeed this has been the path taken by many postal networks elsewhere. Even in countries such as France where the role of the state is never in question, the French Post took about 10 years of institutional transformation, capacity building and political lobbying against the French Association of Banks to obtain its banking license in 2006.
Of particular interest to CGAP is the potential role the Post could play in helping the poor bridge the digital divide. While mobile phones are ubiquitous, take-up of digital accounts for financial transactions remains low in many countries. Many private players are looking to partner with postal networks as a way to build off of their existing trust and to help educate consumers on new products and technologies. We are seeing partnerships emerge in many countries between banks, MNOs and postal networks. In Nigeria, First Bank Nigeria recently launched a partnership with the Nigerian Postal service to expand its FirstMonie mobile payment service. In Tunisia, La Poste Tunisienne is partnering with the telco Tunisiana to offer Mobiflous, a payments product offered to anyone with a Tunisiana phone number that provides access to carry a smart card, allowing those without a bank account to transfer money, make payments, and recharge their phones. In India, the postal department introduced a Mobile Money Order Service (MMOS) allowing the sender to deposit cash at a post office counter and the payee to receive an SMS indicating that the funds have been transferred on his/her mobile phone.
There is no doubt that the number of innovations involving postal networks is on the rise and the entry of the U.S. into the global dialogue on the role of the post is intriguing. With a keen focus on improving access to financial services for the poor, we can only hope that these innovative solutions will lead to the kinds of outcomes for the poor we seek. If this also helps the postal networks remodel their image along the way, all the better.