Postal Banking: Why it should be brought (back) to America

 Postal Banking: Why it should be brought (back) to America

Evan Coursin

Underbanking is a major problem in the US. According to the 2019 FDIC survey of Household Use of Banking and Financial Services, 5.4% of Americans are unbanked. That is, they have no affiliation with any formal bank. No savings account, no checking account, nothing. 5.4% may not sound like a lot, but that is still over 7 million people.

Unbanked rates in the country have been declining over the years, but with millions of people still without access to financial services, the concern for helping them is still high.

Many of these people are not unbanked by choice. Almost half of all unbanked people cited not having enough money to open an account as a reason for being unbanked (Kutzbach, et al.). 

After not having enough money, the most popular reason for people to be unbanked is distrust in traditional banks. And with their seemingly endless number of fees, who could blame them?

Another reason for being unbanked though is that a bank’s location is too inconvenient for some people. Banks have been leaving poor and rural areas in droves, leaving millions of people without access to banking services. But one thing that hasn’t been leaving: the post office. The post office is the great equalizer institution of the US (Solomon, et al.), serving every American no matter where they live. Bei in in the poorest precinct in Chicago or the town in Nebraska with a population of 1, the USPS will deliver mail there.

This fact presents an opportunity. If the USPS was to start offering basic financial services, savings accounts, check deposits, and so forth, it would accomplish two things: 1. Those people without close access to a bank could go to the local post office for their financial needs instead, and 2. The post office would receive another source of revenue that it desperately needs. The USPS has been underfunded by the government for a long time, but that’s a story for another time. Anyway, offering safe and secure financial services to un- and underbanked people could do one major thing: lift them out of poverty. If you’ve taken a class with Mr. Douglass, you’ll know that “the most difficult thing about being poor is that you don’t have any money.” And these people are poor: nearly a third of all people who make less than $30,000 a year are unbanked (Kutzbach, et al.). But being able to cash a check without a 5% fee on that check could go a long way to giving poor people the money they need. Actually, no. Not the money they need, the money they rightfully earned.

But here’s the biggest reason why postal banking should be implemented: it once was. From 1910 to 1966, the USPS offered the basic financial services that so many needed, but couldn’t always get with traditional banks. Granted, because the FDIC didn’t exist until 1933, traditional banks were a lot more susceptible to runs on the bank and people losing all of their savings. But for the start of it, the portal banking service was backed by the US government, which people had quite a bit of confidence in. The services only ended in 1966 because banks had become more secure and could offer more competitive rates than the post office. But the winds of capitalism have been pushing for a reintroduction of postal banking.

Banks are, at their heart, businesses. They exist to make money. And because poor people don’t have the money banks want to use to make more money, they’ve been leaving. But the government? The government is (hopefully) for the people. The first three words of the Constitution aren’t “We the people” for show. And as it is for the people, the government should form programs that help them. Postal banking is just one way that can be achieved.  

Bibliography

Baradaran, Mahrsa. "A Short History of Postal Banking." Slate, Graham Holdings, 19 Aug. 2014, slate.com/news-and-politics/2014/08/postal-banking-already-worked-in-the-usa-and-it-will-work-again.html.

Kutzbach, Mark, et al. How America Banks: Household Use of Banking and Financial Services. Federal Deposit Insurance Corporation, 2019,

Rowan, Lisa. "Would Postal Banking Save the Post Office?" Forbes, 2 Sept. 2020, www.forbes.com/advisor/banking/would-postal-banking-save-the-post-office/#:~:text=The%20United%20States%20Postal%20Service,government%2C%20USPS%20banking%20was%20abolished.

Solomon, Danyelle, et al. "Creating a Postal Banking System Would Help Address Structural Inequality." Center for American Progress, 10 Oct. 2020, www.americanprogress.org/issues/race/reports/2020/10/15/491495/creating-postal-banking-system-help-address-structural-inequality/#fnref-491495-12.