Many of us know post offices around the world as places to send mail, but we also have this impression that these are “old school” state-run institutions without much innovation. In a few countries, like France and Japan, people’s perceptions about the post office are quite different as postal networks have undertaken major transformations into something much more than places that deliver mail. This slow transformation of postal networks is taking place around the world as they are increasingly leveraging their branch networks and other assets to expand on their financial services role. In many countries, they are emerging as important gateways for financial inclusion of the world’s poor. This blog will share a few things you may not already know about postal networks.
Photo Credit: Md Farhad Rahman
1. Did you know that the average cost to send remittances by the post is half the price of the global average of 8.93% of the amount sent? Sending remittances through the post is only 3.9% of the amount sent compared to Mobile Network Operators (MNOs) which charge 7.21% and banks which charge 12.86%. According to data on remittance costs from the World Bank, the goal of reducing the cost of remittances to 5% of the amount sent in 5 years would have been reached had more postal networks been active in the provision of remittances. In many countries, once the post enters the space, Western Union and Money Gram reduce their prices.
2. Did you know that the Bank for International Settlements (BIS) is a partner with the World Bank in adopting 5 principles to reduce the cost of remittances? These principles were adopted first by the G8, then by the G20. The principles focus on reducing costs by increasing competition and transparency. BIS believes that institutions with large networks such as postal networks should take on a more active role in remittances/payments as this will help reduce further the costs of these services by increasing competition.
3. Did you know that according to the latest Findex research on postal networks, clients of the post are more likely to be significantly poorer, older, less educated, and less likely to be employed than those who have an account at a financial institution? This new Findex paper, completed along with the Universal Postal Union (UPU), analyzes a new set of data that includes more detailed information on the ownership of an individual or joint account at a post office. This research confirms the often cited assumption that postal networks are already serving the poor and thus serve as an easy gateway to this segment.
4. Did you know that postal networks have more branches than the entire banking system in countries such as Egypt, Algeria and India? In many of these countries, post offices serve an important role of representing the government in villages with no other official presence. This presence serves an important function that cannot be replicated easily by private shops or retailers. In Egypt, the post serves 22 million clients and has the second largest deposit base in the country, only after the National Bank of Egypt. 83% of savers have balances less than 5,000 Egyptian pounds (approximately $714). The Egyptian Post handles the pension payments of over 5 million Egyptians, many of whom are unable to use ATMs to withdraw their funds and still rely on face-to-face interaction with tellers at the post.
5. Did you know that many postal networks are partnering with MNOs to offer mobile wallets? Mobiflouss in Tunisia now has 200,000 users. La Poste Tunisienne is working with multiple MNOs such as Tunisiana and Tunisie Telecom. In Bangladesh, the post is now offering mobile money orders (remittances via mobile) reaching the many migrant workers who send money to relatives via their phone.
6. Did you know that MasterCard has launched a global strategy to partner with the postal networks across the globe to provide payments services for clients at the Base-of-the-Pyramid (BoP)? The strategy focuses on offering pre-paid cards then advancing to new products as customers become more comfortable and gain trust in using the cards.
7. Did you know that Al Barid Bank in Morocco has now reached 5.5 million savers and is offering a variety of new products such as insurance (500,000 clients), housing loans and remittances? Al Barid is the financial services arm of the Moroccan post which was authorized by the Central Bank to transform into a regulated bank and is now the largest financial service provider to the poor in Morocco. Al Barid has increased its deposit base 20-fold since 2005 and holds 20% of the insurance market in the country (in partnership with Wafaa insurance).
8. Did you know that many postal networks are now serving as brokers or agents for insurance companies? Craig Churchill of the ILO says that insurance is a complicated product: “it is not bought, it is sold”. It is unlike other products which can’t be tested in small quantities before it is bought. Insurance requires trusted agents who can educate the consumer and answer complicated questions. India Post is the one postal network that has created its own insurance services arm and does not partner with an insurance provider. India Post now has 22.8 million rural insurance policies and 6.1 million urban policies.
9. Did you know that postal networks offer financial services through a variety of models? These include 1) partnership with a bank (Argentina); 2) transforming into a bank (Morocco, Gabon); 3) serving as agent or broker for insurance companies (Brazil); and 4) directly via the traditional (unregulated) postal savings accounts. UPU’s publication “Global Panorama on Postal Financial Inclusion” provides interesting insights on these different business models.
10. Did you know that in many developed countries such as Japan, Italy, and France the post remains an important financial service provider? In fact, 80% of the Japanese population has access to postal savings accounts. These global experiences and emerging global evidence suggest that postal networks in many countries can be an important gateway to improved access and usage of quality financial services beyond payments, especially with regard to savings and insurance products that require trust and information targeted to poor consumers.
It is in-deed interesting to note about the postal network as part of the financial landscape.
I was one of the beneficiaries as M.Sc. Degree student in Norway, had a post office account that was exiting in our campus. The postal account helped me to get my monthly scholarship stipend. I withdrew the money I needed and kept the remaining kept as saving.
However, I have to confess that despite the benefit I got as a student, I was one of those who thinks postal service to be obsolete and outdated service system given the current virtual development and communication systems such as e-banking, mobile baking and others that are virtual methods and social media.
“10 Things You May Not Know about Postal Networks” has given me great lessons, I learning about the transformation in the postal networks and service they rendered, the new business models developed and used.
The postal network and its roles for rendering financial services deserve more publicity to adequately integrated as part of the financial land scape both in the analysis and program with the concerned stakeholder. I was inspired to learn more and thank you.
Postal delivery service may be half as cheap as the global average cost, yet very many prefer to send money remittance through private channels, e.g. courier services, and through bank to bank transaction, or through ATM deposits, because it is much faster than postal services. Postal services can be effective when they upsacale their systems capability, and collaborate with many small businesses located in the rural areas. In the Philippines, remitting money by mobile phone is most useful, and very affordable, and very fast.