It is rare for Postmaster General Louis DeJoy to do something that deserves praise. Under his leadership, the quality of service provided by the US Postal Service has, for the most part, been in decline. Mail delivery slowed down, for example, while postage rates have increased. But the Post is at least going in the right direction when it comes to presenting a new offer to customers: financial services.
Last month, following an executive order from President Biden, USPS launched a pilot program in four cities that allows customers to cash checks up to $ 500, receiving their money on a prepaid debit card. Although the services provided by the pilot are extremely limited, this opens up an opportunity for the post office to significantly explore the feasibility of postal banking – a service that the Postal Service suspended in the 1960s, and which could help cope with the persistent unbanked population in the United States.
Since 2019, 5.4% of American households were unbanked, which means that no member of the household had a current or savings account. While this means that the vast majority of Americans have access to some kind of bank account, it still represents about 7.1 million households without. Add to that the number of underbanked people – those who may have a checking account but still use financial services outside the banking system, like check cashing or payday loans – and you have more than 30 million households who do not have adequate access to affordable financial services.
This is why postal banking could have a very positive impact on low income people. First, it already has the geographic infrastructure to reach Americans across the country; 99% of people live within 10 miles of a post office. Banks, on the other hand, do not have branches in 59 percent US zip codes, which means some 60 million people live in areas that have post offices but do not have a bank branch. And second, it would offer people cheaper alternatives to predatory financial services – from banks that demand excessively high minimum accounts to payday lenders who charge exorbitant fees and interest rates – luring more people into the banking system. After all, according to an FDIC study, nearly half of the unbanked population cite not having enough money to meet minimum balance requirements as the reason they don’t have an account. (Thirty percent say this is the main reason.)
If it is to close that gap, the Postal Service should aim to leverage its advantages – it already has locations and staff across America – to keep the costs of its financial services as low as possible. Currently, USPS charges customers $ 5.95 to cash a check, which, while cheaper than some predatory check-cashing chains, is in some cases more expensive than the service. Walmart provides. The problem that postal banking should seek to solve is that it is often expensive to be poor. While the rich not only have free access to their money, but earn interest on their savings, low-income people have to pay relatively high fees to access their own money.
The post office financial services pilot program is also too limited in scope and scope. This is far from expansive enough to make it known that the Post even offers a new service, which could contribute to the idea that this kind of initiative is not worth the investment, as it is likely that few of people are taking advantage of it while it’s still around. USPS also does not provide enough services that could begin to show the public what a modern postal banking system in the United States could look like.
So while the pilot project is a step in the right direction – a step that begins to consider expanding the post office’s services rather than downsizing – there is still work to be done. Ultimately, USPS is a public service that should be provided to Americans regardless of their financial situation. And if its financial services are not aimed at being affordable and widespread, then it is failing in its mission to “provide postal services in all communities. “
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