Postal banking is just an idea in the United States, but it's taking form in America's northern neighbor.
Toronto-Dominion Bank, which has assets of 1.8 trillion Canadian dollars ($1.3 trillion U.S.), said Wednesday it is partnering with Canada's postal service to offer low-cost loans for amounts as small as 1,000 Canadian dollars. TD and Canada Post said strong consumer demand during a three-month market test encouraged them to offer the loan, called the Canada Post MyMoney Loan, nationwide.
"We were really surprised by the demand for the product, which, frankly, exceeded our expectations," said Michael Yee, vice president of financial services at Canada Post.
Canadians of all income levels and credit scores applied for the unsecured loan. Applicants said they planned to use the funds to cover emergency expenses including car repairs and veterinarian bills. The product is intended to reach all Canadians, especially those in rural, remote and Indigenous communities who may not have local access to affordable loans, officials said.
Attempts at combining banking services with the scale of the United States Postal Service have so far been met with slow uptake and resistance from the banking industry. In the U.S., proposals for the Postal Service to engage in financial services have ranged from limited services such as check cashing to fully insured financial arms capable of taking deposits and making loans without the presence of a bank as a backer. The alliance like the one between TD and Canada Post hasn't been tried stateside.
The announcement doesn't advance postal banking in the U.S., said David Pommerehn, general counsel at the Consumer Bankers Association, a Washington, D.C.-based industry group.
"You have to look at what's happening in Canada and what's happening here in two very different ways," Pommerehn said. "Providing customers with access to bank products delivered through a well-regulated financial institution at a post office branch is entirely dissimilar from transforming a federal agency into an independent financial services issuer."
The idea of postal banking in the U.S. has gained attention in recent years. In the early months of COVID-19,
Beginning last fall, the U.S. Postal Service began allowing customers at a handful of locations to redeem business checks for Visa gift cards of up to $500. Over five months, the program brought in just six customers and $35.70 in fees, according to a regulatory fiiling by the Postal Service.
TD hasn't announced a launch of similar products in the U.S. The bank is
To be sure, differences between the banking systems in Canada and the U.S. mean any stateside version wouldn't follow the exact same path. The U.S. has thousands of banks, from global powers like JPMorgan and Citigroup to community banks designed to serve specific industries. Most banking in Canada goes through a handful of large institutions, including TD.
Customers can choose between variable and fixed interest rates and spread repayments out between one- and seven-year periods. Fees will only be assessed when a payment is missed. Payments can be made on a weekly, biweekly, monthly or semimonthly basis, Canada Post said. TD will transfer loan balances directly into the accounts of approved applicants at any Canadian financial institution.
"This alliance enables TD to play a meaningful role in helping to expand access to banking to more Canadians," Michael Rhodes, the bank's head of Canadian banking, said in a statement.
Canada Post handles more than 5 million financial transactions annually, including money orders and remittances within Canada and abroad. It said it is considering the addition of more financial products and services.
