Postal banking won’t deliver for USPS

Despite another quarter of surging net losses at the U.S. Postal Service, leadership is all too eager to plunge the agency into even more debt.

During its board of governors meeting on Aug. 9, key executives suggested that the USPS be “bold and creative” in saving the agency and paying down the more than $10 billion in debt it owes to the U.S. Treasury.

The solution by Democrats like Sen. Elizabeth Warren of Massachusetts and Rep. Alexandria Ocasio-Cortez of New York is to create an outlandish system of “postal banking,” in which consumers would be able to deposit their money at post offices; and consumers, as well as businesses, would be able to get loans from the agency.

But the USPS’ existing financial services are quickly losing revenue, and more sophisticated products such as loans would be no different. Instead of pursuing postal banking, USPS should be truly bold and creative by cutting down on billions of dollars in waste.

Between plunging first-class mail volumes and e-commerce giants taking last-mile package deliveries into their own hands, USPS’ situation appears hopeless at first glance. And for every pressing public policy problem, there’s bound to be a billion bizarre suggested fixes.

The USPS’ dysfunction is pretty obvious, and making it into a bank wouldn’t make things better.

Even the agency’s employee-run credit unions oppose the move — the National Council of Postal Credit Unions board chair Becca Cuddy argued that “rather than try to reinvent the wheel,” postal credit unions could expand their reach to new consumers through bank partnerships.

The U.S. Treasury also concluded in their task force report on USPS finances that “expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued.”

The USPS is already knee-deep in financial services and the results aren’t pretty. Consumers can bank with the USPS by heading to a post office and writing themselves a money order or cashing a money order whenever they would like (max $1,000 per money order for $1.70).

Consumers can also opt to send others cash through money orders, and recipients can cash the money order at their nearest post office. The USPS then operates a simple bank at a negative interest rate.

Despite charging consumers for storing or sending money at post offices, USPS money orders have declined in revenue year over year. And revenue from money orders dropped more than 5% in the third quarter this fiscal year compared to a year earlier.

Back in 2008, the average money order would net the USPS 47 cents. In 2017, the agency actually was running at a loss of 5 cents per money order, though that figure rebounded slightly to a positive 14 cents the following year. Even with the recent uptick in profit, money order revenue is down roughly 30% in the past ten years.

Revenues continue to fall while competitors such Western Union see their consumer-to-consumer money transfer businesses grow. These trends have persisted for years.

Far from “reinventing the wheel,” postal banking would just add to the USPS’ failing business lines that are far from its core purpose. The agency should reject calls to provide financial services, and double-down on what it’s supposed to do: deliver mail.

This could be done in a far more cost-effective way if the USPS embraces employee scheduling efficiency, cracks down on highway contract cost inflation and keeps fleet procurement costs low. Surging debt should force the agency to focus on what it’s good at instead of chasing bizarre business lines.