Providing Non-Bank Financial 

Services for the Underserved

January 27, 2014

Report Number: RARC-WP-14-007

WHITE PAPER
U.S. Postal Service Office of Inspector General January 27, 2014

i

Providing Non-Bank Financial Services for 

the Underserved

Millions of Americans do not have a bank 

account, or use costly services like payday 

loans and check cashing exchanges just to 

make ends meet. The entire underserved

population comprises more than a quarter 

of all U.S. households — some 68 million 

adults. They are an economically diverse 

mix of working and middle class families, 

poor and unemployed people hurt by the 

recent economic crisis, young people, 

immigrants, and others who are trying to 

make it paycheck to paycheck. Together, 

they represent a huge market. In 2012, 

they spent about $89 billion just on interest 

and fees for alternative financial services.

The Postal Service is well positioned to 

provide non-bank financial services to 

those whose needs are not being met by 

the traditional financial sector. It could 

accomplish this largely by partnering with 

banks, who also could lend expertise as 

the Postal Service structures new 

offerings. The Office of Inspector General 

is not suggesting that the Postal Service 

become a bank or openly compete with 

banks. To the contrary, we are suggesting 

that the Postal Service could greatly 

complement banks’ offerings. The Postal 

Service could help financial institutions fill the gaps in their efforts to reach the 

underserved. While banks are closing branches all over the country, mostly in lowincome areas like rural communities and inner cities, the physical postal network is 

ubiquitous. The Postal Service also is among the most trusted companies in America, 

and trust is a critical element for implementing financial services. With affordable

EXECUTIVE SUMMARY

Highlights

One in four U.S. households lives at 

least partially outside the financial 

mainstream — without bank accounts or 

using costly services like payday 

lenders.

The average underserved household 

spends $2,412 each year just on interest 

and fees for alternative financial 

services.

Postal financial services may appeal to 

many customers who feel abandoned by 

major financial institutions. Postal 

organizations have an unmatched ability 

to reach consumers from diverse 

backgrounds.

Many international posts are already 

garnering significant new revenue and 

keeping citizens connected by offering 

financial services.

Financial services have been the single 

best new opportunity for posts to earn 

additional revenue. For the Postal 

Service, this might ultimately translate 

into $8.9 billion per year.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

ii

financial offerings from the Postal Service, the underserved could collectively save 

billions of dollars in exorbitant fees and interest. This could make a big difference to 

struggling families — on average, people who filed for bankruptcy in 2012 were just $26

per month short of meeting their expenses.

Using posts to expand citizens’ financial options and access is not a novel idea; many 

international posts already succeed in providing financial services. Much of their 

success is due to the ubiquity of their networks and the trust the public places in them. 

In addition, the U.S. Postal Service already offers some types of financial services, like 

money orders and international money transfers, so it has an established presence.

Moreover, expanded financial offerings would be in the spirit of the organization’s 

founding mission to support commerce and serve citizens.

This paper identifies specific opportunities for the Postal Service to offer non-bank 

financial services. These services could include reloadable prepaid cards with features

that encourage people to save money, mobile transactions, and products that help the 

underserved take part in e-commerce. They also could include new ways of transferring 

money both domestically and internationally, and perhaps even include small loans that 

would help customers overcome unexpected expenses. As society becomes

increasingly cashless, the Postal Service’s ability to provide a physical link to the new 

digital economy will become more and more vital.

Many people could benefit from the Postal Service expanding its presence in the 

financial services market. The millions of citizens currently struggling would have new 

ways to conduct their financial transactions. Non-bank financial services from the Postal 

Service could help these people to gain more financial security, and help foster a culture 

of savings. In addition, by partnering with banks and other financial institutions, the 

Postal Service could create a “win-win” situation. Postal financial services could 

complement the current offerings from banks by helping banks reach customers in 

geographic areas where they lack a physical presence, by offering products to 

customers who were not previously a main focus of banks, and by helping some 

customers transition to traditional bank savings or checking accounts. In addition, 

financial services could result in major new revenue for the Postal Service. If even 10 

percent of what the underserved currently spend on interest and fees instead went to 

more affordable offerings from the Postal Service, it could lead to $8.9 billion in new 

revenue per year.

A suite of financial services from the Postal Service could be a powerful new tool to help 

the underserved become more financially secure. As a first step, the Postal Service 

could explore services similar to those it is already authorized to provide, such as 

money orders and international money transfers. In addition, small market tests in key 

geographic areas could help to demonstrate new products’ viability. Although some 

financial services may have a longer development period, others have the potential to 

be a big hit right away. A quick victory or two could help garner stakeholder support for 

additional postal financial services. There is a clear market need for innovative financial 

products, and millions of families would benefit from more affordable solutions. The 

Postal Service could be exactly what they are looking for.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

iii

Table of Contents

Introduction ..................................................................................................................... 1

Who are the Underserved? ............................................................................................. 2

The Postal Service is Well Suited to Provide Non-Bank Financial 

Services .......................................................................................................................... 4

Unmet Market Needs................................................................................................. 5

Competencies and Assets ......................................................................................... 6

Public Purpose........................................................................................................... 8

Revenue Opportunity................................................................................................. 9

The Postal Service Could Offer a Variety of Non-Bank Financial 

Services .......................................................................................................................... 9

Payment Services.................................................................................................... 10

Products to Encourage Savings............................................................................... 11

Credit Services......................................................................................................... 12

Postal Financial Services Would Have Clear Benefits .................................................. 14

Benefits for the Public .............................................................................................. 14

Benefits for the Financial Services Community........................................................ 15

Benefits for the Postal Service................................................................................. 16

Strategic Considerations for the Postal Service ............................................................ 17

Timing is a Critical Factor ........................................................................................ 17

Consider Partnerships with the Private Sector......................................................... 18

Identify and Understand Key Customers ................................................................. 18

Monitor and Respond to Emerging Trends .............................................................. 19

The UPU International Financial System Might Offer Advantages........................... 20

Conclusion .................................................................................................................... 21

Appendices

Appendix A The Postal Savings System................................................................. 22

Appendix B Examples of Postal Financial Services................................................ 24

Appendix C Lessons Learned from International Posts .......................................... 25
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

iv

Tables

Table 1 Examples of Postal Financial Services................................................ 24

Table 2 How Have Posts Made Financial Services Successful?...................... 26

Figures

Figure 1 Banked Status of U.S. Households ....................................................... 2

Figure 2 Reasons for Being Unbanked................................................................ 3

Figure 3 Guiding Principles for New Products ..................................................... 5

Figure 4 Post Offices vs. Bank Branches ............................................................ 6

Figure 5 Postal Card as Linchpin to Financial Offerings.................................... 10

Figure 6 Payday vs. Postal Loans ..................................................................... 13

Figure 7 The Growth of the Underserved Market .............................................. 16

Figure 8 Financial Services at Foreign Posts .................................................... 25
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

1

Providing Non-Bank Financial Services for 

the Underserved

Introduction

Banks and other financial institutions play a critical role in American society. Accounts at 

federally insured depository institutions provide safety and security, protect households 

from theft, help families save money, and can open the door to affordable credit. Yet,

more than a quarter of American households are left outside or on the fringes of the 

traditional financial system. Some have no bank account whatsoever. Others have a 

checking account, but do not qualify for traditional forms of credit, forcing them to use 

costly services like payday loans and car title loans — which can often do more harm 

than good. Many of the 34 million financially underserved households — representing 

68 million adults — are treading water very close to the economic edge.1 Unexpected 

expenses can push them over the brink into homelessness or bankruptcy, which come 

with broad social and economic costs. In addition to this at-risk population, there are 

many other Americans who are simply looking for new financial options.

Many interested parties have been trying for years to bring the underserved into the 

traditional financial system, and have made progress. In 2005, Congress required the 

Federal Deposit Insurance Corporation (FDIC) to conduct biennial surveys of the 

financial habits of underserved Americans and banks’ efforts to reach them.

2 These 

reports provide strong evidence that the unmet need for banking services is nationally 

wide and deep. In many countries, policymakers have turned to postal organizations to 

increase the level of financial inclusion. While federal law currently places restrictions on 

new non-postal products and services, the U.S. Postal Service already offers money 

orders, international money transfers, and other relevant financial products.

This paper aims to explain how the Postal Service could expand its offerings to include

a broader suite of non-bank financial services and products. These new offerings could 

not only bring financial stability and flexibility to the underserved, but also could yield 

broad benefits to the U.S. economy, the financial services industry, and the Postal 

Service itself. We contracted with a team of experts in the U.S. financial services

industry, international postal operations, and other relevant areas to help conduct our 

analysis.

3

 1 Federal Deposit Insurance Corp. (FDIC), 2011 FDIC National Survey of Unbanked and Underbanked Households, 

September 2012, http://www.fdic.gov/householdsurvey/2012_unbankedreport.pdf, pp. 4-10. 2 Both studies are available on the FDIC’s website at http://www.fdic.gov/unbankedsurveys/ and 

http://www.fdic.gov/householdsurvey/. 3 For this project we contracted with Decision/Analysis Partners, who assembled a team of experts including: Hans 

Boon, a world-renowned expert on postal operations and financial inclusion strategies who has helped implement 

postal financial services in various countries, formerly with ING and the Netherlands Postbank; Jean Philippe 

Ducasse, an expert on postal strategies, formerly with the European Commission, La Poste, and the Universal Postal 

Union (UPU); James Pérez Foster, a former VP with Merrill Lynch and Morgan Stanley Smith Barney, who has recent

experience as an expert on banking services for underserved communities; and Ana Harvey, the former head of the 

Small Business Administration’s Office of Women’s Business Ownership. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

2

Who are the Underserved?

The underserved are a geographically, economically, and demographically diverse 

group of people who, by choice or circumstance, operate partially or completely outside 

the traditional banking system. We 

define underserved as primarily 

consisting of two main groups: the 

unbanked, who have no checking 

or savings account, and the 

underbanked, who have a bank 

account but also used at least one 

non-bank financial service during 

the past year. These non-bank 

financial services include check 

cashing, money orders, 

remittances, payday lending, 

pawnshops, rent-to-own 

agreements, and other similar 

products and services. We refer to 

them in this paper as “alternative 

financial services.” In addition, 

there also are many fully-banked

consumers who are unhappy with 

their current options and are 

seeking alternatives.

There are about 34 million 

underserved U.S. households, 

comprising more than a quarter of 

all American families, as Figure 1

illustrates. Being underserved 

often comes at a hefty price. The average underserved household has an annual 

income of about $25,500 and spends about $2,412 of that just on alternative financial 

services fees and interest.4 That amounts to 9.5 percent of their income. To put that into

perspective, that is about the same portion of income that the average American 

household spends on food in one year.

5 In 2012 alone, the underserved paid some $89

billion in fees and interest.6

 4 Based on 34 million households, earning an average of $25,500 per year, spending a total of $82 billion in 2011. 

KPMG, Serving the Underserved Market, 2011, 

http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/serving-underserved-market.pdf, p.1, 

and Center for Financial Services Innovation (CFSI), 2012 Financially Underserved Market Size Study, December 

2013, http://www.cfsinnovation.com/content/2012-financially-underserved-market-sizing-study, p.1. 5 Based on average before tax income of $65,596 and average food expenditures of $6,599. Bureau of Labor 

Statistics, Consumer Expenditure Survey, 2012, http://www.bls.gov/cex/2012/combined/income.pdf, p. 1. 6 CFSI, 2012 Financially Underserved Market Size Study, p.1.

Figure 1: Banked Status of U.S. Households

Unbanked 

8%

Underbanked 

20%

Fully 

banked 

69%

Banked, 

but underbanked 

status 

unclear 

3%

Source: 2011 FDIC National Survey of Unbanked and 

Underbanked Households.

LEFT OUT

More than a quarter of U.S. households live partially or 

completely outside the traditional banking system.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

3

People are unbanked for a wide range of reasons.

7 Figure 2 gives a breakdown of the 

key reasons people cite for their unbanked status. 

According to the FDIC, certain segments of the population are disproportionately 

underserved, including lower-income, black, and Hispanic households, as well as 

people under the age of 25. However, white households still account for half of the 

underserved. Geographically, the underserved live throughout the country. However,

they are over-represented in the South, where poverty is more prevalent, and in inner 

cities.

8

 7 While the FDIC found that the most common reason people do not have a bank account is that they do not have 

enough money, a separate survey by the Federal Reserve found another leading cause: 24 percent of respondents 

said they do not have a bank account because: “I don’t like dealing with banks.” Board of Governors of the Federal 

Reserve System, Consumers and Mobile Financial Services, March 2012, 

http://www.federalreserve.gov/econresdata/mobile-devices/2012-appendix2.htm, Appendix 2. 8 FDIC, 2011 FDIC National Survey of Unbanked and Underbanked Households, p.15.

Figure 2: Reasons for Being Unbanked

32.7%

21.0%

7.5%

6.6%

6.4%

5.4%

16.3%

4.3%

Don't have enough money

Don't need or want an account

Don’t like dealing with and/or don’t trust banks

Can’t open an account due to ID, credit, or 

banking history problems

Previously had an account but the bank closed it

Bank fees or balance requirements are too high

Other/none of the above

Do not know/refused

UNBANKED HAVE DIVERSE REASONS

When asked why they don't have a bank account, 46 percent of the unbanked said they couldn't 

use banks, either because they don't have enough money, don't meet the requirements, or banks 

closed their account. Twenty-nine percent said they don't want, need, like, or trust banks.

Percent of the unbanked

Source: 2011 FDIC National Survey of Unbanked and Underbanked Households.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

4

There also is a fair amount of economic diversity within the underserved population. 

While a bit more than half of underserved households earn less than $30,000 a year, 

more than a quarter earn at least $50,000. A full 57 percent are employed, just 10 

percent are unemployed, and a third are not in the labor force — often because they are

on disability or retired. Nearly half of the underserved have attended at least some level 

of college.9

The underserved tend to have very little savings. 

Just one unexpected expense, such as a car repair

or a medical procedure, can quickly become a major 

crisis, forcing them to seek credit from the likes of 

payday lenders or worse. Payday loans are 

advertised as loans that must be repaid with the borrower’s next paycheck. However, 

most borrowers cannot afford to pay the loan back in full, so they renew the loan

repeatedly and are in debt for an average of 5 months of the year, all the while paying 

fees that typically equate to a 391 percent annual interest rate.10

Rather than giving borrowers the credit they need to climb out of a hole, these types of

loans often dig borrowers deeper into debt. Research has shown that a majority of

payday loan users are borrowing money for everyday expenses, rather than unexpected 

emergencies.11 In essence, these consumers rely on overly expensive short term credit 

to balance out the ups and downs of their finances. This suggests a strong need for 

financial services that are more stable and affordable.

The Postal Service is Well Suited to Provide Non-Bank

Financial Services

The Postal Service is an ideal fit for offering non-bank financial services, based on four 

basic guiding principles for potential new products. Figure 3, on the following page,

highlights these four principles, each of which is explained below in more detail.

 9 Ibid. 10 Pew Charitable Trusts, Payday Lending in America: Who Borrows, Where They Borrow, and Why, July 2012, 

http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Payday_Lending_Report.pdf, pp. 6-7. 11 Ibid., p.13.

Most payday loans carry 

extremely high fees that 

equate to an average annual 

interest rate of 391 percent.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

5

Figure 3: Guiding Principles for New Products

Unmet Market Needs

There are many non-profits, financial advocacy groups, and government entities 

focused on improving financial access. While they have made significant strides, there 

is still a tremendous unmet market demand for financial services. As mentioned above, 

28 percent of all U.S. households are either unbanked or underbanked. Millions of 

additional adults are open to new financial service options. In the current market, these 

people are missing the financial services they want and need.

Banks are closing branches across the country (nearly 2,300 in 2012).12 Although the 

number of closings is only a fraction of the total number of branches, the closings are 

not spread evenly. The closings are heavily hitting low-income communities, including 

rural and inner-city areas — the places where many of the underserved live.

13 In fact, 

an astounding 93 percent of the bank branch closings since late 2008 have been in ZIP

Codes with below-national median household income levels.14 This leaves some 

communities stranded without physical access to quality financial services, and the 

problem could get much worse. Banking industry experts predict that banks will 

continue to shut branches, particularly in small communities.15

Even in neighborhoods that still have bank branches, there is no guarantee that the 

underserved will find what they need. Less than half (43 percent) of banks reported that 

they actively develop products and services for underserved consumers.16 While free

checking used to be a widespread offering from banks, it has become much less 

 12 Robin Sidel, “After Years of Growth, Banks are Pruning Their Branches,” The Wall Street Journal, March 13, 2013, 

http://online.wsj.com/article/SB10001424127887323699704578326894146325274.html. 13 Nelson D. Schwartz, “Bank Closings Tilt Toward Poor Areas,” The New York Times, Feb. 22, 2011, 

http://www.nytimes.com/2011/02/23/business/23banks.html?pagewanted=all&_r=0, and David Hayes, et.al., “Banks 

Follow the Money and Exit Lower-Income Areas,” SNL Financial, April 27, 2012,

http://www.snl.com/InteractiveX/ArticleAbstract.aspx?id=14485078. 14 Frank Bass and Dakin Campbell, “Predator Targets Hit as Banks Shut Branches Amid Profits,” Bloomberg, May 2, 

2013, http://www.bloomberg.com/news/2013-05-02/post-crash-branch-closings-hit-hardest-in-poor-u-s-areas.html. 15 Robin Sidel, “After Years of Growth, Banks are Pruning Their Branches,” The Wall Street Journal. 16 FDIC, 2011 FDIC Survey of Banks’ Efforts to Serve the Unbanked and Underbanked, 2012, 

http://www.fdic.gov/unbankedsurveys/2011survey/2011report.pdf, p. 4.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

6

Figure 4: Post Offices vs. Bank Branches

POs in ZIPs 

with no 

banks

38%

POs in ZIPs 

with 1 bank

21%

POs in ZIPs 

with at least 

2 banks

41%

Note: Excludes Post Offices with unique ZIP Codes.

Sources: FDIC 2013 Summary of Deposits; Postal 

Service facilities database.

MOST POST OFFICES ARE IN 

BANK DESERTS

Fifty-nine percent of internally-managed Post Offices 

are in ZIP Codes with zero or one bank branch, 

illustrating that the Postal Service is geographically 

well-positioned to reach people with little-to-no access 

to retail banking services. 

common. At the same time, banks have continued to increase existing fees and 

introduce new fees across a wide range of products and services.17

Competencies and Assets

The Postal Service has numerous competencies and assets that would be critical for 

providing non-bank financial services. The first and possibly most important factor is the 

sheer ubiquity of the Postal 

Service. The vast retail network 

of more than 35,000 Post 

Offices, stations, branches, 

and contract units is spread out 

across the country and is 

particularly well established in 

small towns. Banks and other 

financial institutions still 

maintain tens of thousands of 

branches and other locations

across the country, but that 

network is fragmented among 

thousands of players and is

inextricably linked to population 

density and centers of 

economic growth. The postal 

network, on the other hand, is

a single, unified network that is

linked to geography. As Figure 

4 shows, 59 percent of Post 

Offices are in ZIP Codes with 

one or no bank branches. 

A second factor is Americans’ 

trust and familiarity with the 

postal “brand.” Trust is a 

crucial asset in financial 

services, especially when 

considering bank-wary 

unbanked and underbanked 

households that have been 

dealing with sometimes 

untrustworthy alternative 

financial services providers.

While banks operate efficiently and can reliably handle most consumers’ financial 

transactions, the public’s trust in banks to protect their personal information has 

 17 Richard Barrington, “Bank Fees Survey Mid-2013: Free Checking Hits a New Low,” MoneyRates.com, August 19, 

2013, http://www.money-rates.com/research-center/bank-fees/.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

7

declined since 2004, dropping from 48 to only 35 percent in that time.

18 In addition, a

June 2013 survey found that only 26 percent of the public has much confidence in U.S. 

banks, and that this number has not risen above 40 percent since 2007.19

On the other hand, a recent market survey found 

that 68 percent of respondents agree or strongly 

agree that the Postal Service is reliable and 

trustworthy.20 When it comes to privacy, the 

Postal Service is consistently ranked as the most 

trusted federal entity, and was recently identified 

as the fourth most trusted company in the United 

States.21 The public’s trust in the Postal Service 

could go a long way when it comes to serving customers looking for new financial 

solutions, as trust has been identified as a critical factor in successfully implementing 

financial services.

22

In addition, the Postal Service has extensive experience in the financial services market 

through current and past products. By offering these products and services, the Postal 

Service has accumulated essential institutional experience with financial transactions.

Current Products and Services

The Postal Service has played a longstanding role in providing domestic and 

international money orders. The Postal Service is actually the leader in the U.S. 

domestic paper money order market, with an approximately 70 percent market share.23

This is a lucrative business line and demonstrates that the Postal Service already has a 

direct connection to the underserved, who purchased 109 million money orders in fiscal 

year (FY) 2012. Those sales generated $166.3 million in revenue and incurred 

attributable costs of just $110.5 million.

24 The market is gradually shrinking, however, in 

competition with electronic money transfer alternatives.

25 In addition to domestic money 

 18 Ponemon Institute, Most Trusted Retail Banks for Privacy, October 10, 2013, 

http://www.ponemon.org/local/upload/file/2013%20MTC%20Banking%20Briefing%20V2.pdf, p. 5. 19 Dennis Jacobe, Gallup, Americans’ Confidence in Banks Up for First Time in Years, June 13, 2013,

http://www.gallup.com/poll/163073/americans-confidence-banks-first-time-years.aspx. 20 Aytm, United States Postal Service Brand Survey, April 21, 2012, 

https://aytm.com/surveys/167290/stat/7a700df2ff4221ec54cc4e2049f01b7f#charts/chart=pie,color=0. 21 Ponemon Institute, 2012 Most Trusted Companies for Privacy, January 28, 2013, 

http://www.ponemon.org/local/upload/file/2012%20MTC%20Report%20FINAL.pdf. 22 Alexandre Berthaud and Gisela Davico, Global Panorama on Postal Financial Inclusion: Business Models and Key 

Issues, UPU, March 2013, 

http://www.upu.int/fileadmin/documentsFiles/activities/financialInclusion/publicationGlobalPanoramaFinancialInclusio

nEn.pdf, p. 7. 23 U.S. Postal Service Office of Inspector General (OIG), Digital Currency: Opportunities for the Postal Service, 

RARC-WP-12-001, October 3, 2011, http://www.uspsoig.gov/sites/default/files/document-library-files/2013/RARCWP-12-001.pdf, p. 31. 24 U.S. Postal Service, “Public Cost and Revenue Analysis, Fiscal Year 2012,” http://about.usps.com/who-weare/financials/cost-revenue-analysis-reports/fy2012.pdf, pp. 2, 5. 25 Fiscal year revenues were $191.1 million in 2009, $183.2 million in 2010, and $172.7 million in 2011. U.S. Postal 

Service, “Public Cost and Revenue Analysis, Fiscal Years 2009 to 2011,” available at http://about.usps.com/who-weare/financials/welcome.htm. 

The public puts much greater 

trust in the Postal Service than 

in banks. While more than twothirds of the public trusts the 

Postal Service, just 26 percent 

have much confidence in banks.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

8

orders, the Postal Service also sells international money orders, which can be cashed at 

post offices in 29 countries.26

While its domestic and international money orders are currently paper-based, the Postal 

Service does offer electronic money transfers to nine Latin American countries through 

the Dinero Seguro® (Spanish for “sure money”) service.27 This type of service is also 

known as an international remittance. For relatively small fees, customers at nearly 

3,000 participating U.S. Post Offices can use the service to electronically transfer funds 

to participating countries.28

Since 2011, the Postal Service has sold prepaid debit cards in the form of open-loop 

American Express gift cards as part of a market test.29 Most Post Offices that sell

greeting cards also sell the gift cards, which come in various denominations and can be 

spent at any merchant that accepts American Express. After an initial one-time 

purchase charge, the cards have no additional fees for purchasers or recipients. The 

Postal Service has extended the market test past the initial 2-year period, and 

expanded the scope of the test to include the sale of closed-loop gift cards for major 

national retailers like Amazon, Barnes & Noble, Subway, and Macy’s.30

Postal Savings System

In addition to its current offerings, the Postal Service has offered other products and 

services in the past. For example, from 1911 to 1967, the Postal Savings System gave 

people the opportunity to make savings deposits at designated Post Offices nationwide. 

The system hit its peak in 1947 with nearly $3.4 billion in savings deposits from more 

than 4 million customers using more than 8,100 postal units. The system was 

discontinued in 1967 after a long decline in usage.

31 Interestingly, the system was 

extraordinarily popular with immigrants in the early 20th century. For more information 

on the Postal Savings System, please see Appendix A.

Public Purpose

By offering non-bank financial services, the Postal Service could fulfill an essential 

public purpose: increasing the level of financial inclusion in the United States and 

expanding the number of alternatives for all consumers. Promoting the financial health 

of all citizens and meeting the needs of the unbanked are longstanding federal 

 26 U.S. Postal Service, USPS.com: “Learn About Domestic & International Money Orders,” 

https://www.usps.com/shop/money-orders.htm. 27 For a list of participating countries, see https://www.usps.com/shop/wire-money-internationally.htm. 28 U.S. Postal Service, “Send Money Home Securely with ‘Dinero Seguro,’” March 20, 2013, 

http://about.usps.com/news/state-releases/ma/2013/ct-ma_2013_0320.htm. 29 Open-loop cards are endorsed by an electronic payment network such as Visa or MasterCard, and are usable for 

in-store or online payments everywhere the network is accepted. Closed-loop cards are limited to a specific 

merchant. For more information on the Postal Service’s gift cards, please see U.S. Postal Service, “Gift Cards Market

Test Launch,” 2011, http://about.usps.com/postal-bulletin/2011/pb22313/html/info_005.htm. 30 “Order Granting Extension of Gift Card Market Test,” Postal Regulatory Commission Order No.1781, July 19, 2013, 

http://www.prc.gov/Docs/87/87368/Order_1781.pdf, and David Rubin, Postal Regulatory Commission data collection 

report for docket No. MT2011-2, October 18, 2013, 

http://www.prc.gov/Docs/88/88034/Data%20Coll%20Rpt%20FY13%20Q3-4%20Final.pdf. 31 U.S. Postal Service, Postal Savings System, July 2008, http://about.usps.com/who-we-are/postal-history/postalsavings-system.pdf. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

9

priorities.32 Postal financial services could assist underserved families in making steps 

toward the mainstream financial system, possibly building up savings, and eventually

embracing offerings from traditional retail banks. Moreover, postal financial services 

would fit well with the Postal Service’s founding mission to serve citizens and support 

the growth of commerce.

33

Revenue Opportunity

Financial services are the single biggest driver of revenue for 

posts around the world, after letter mail.34 Declining mail volume 

has led many posts to find new ways to diversify their income, 

and financial services have been an even greater source of new 

money than parcel delivery and logistics, accounting for an 

average of 14.5 percent of revenue for postal organizations in 

industrialized countries in 2012.35 A nationwide network of Post 

Offices that serve as highly valuable retail space further boosts the potential for financial 

services revenue.

New products and services generally take a while to develop, but startup and 

implementation pains could be minimized by forming partnerships with private sector 

organizations in the financial services industry.

36 

The Postal Service Could Offer a Variety of Non-Bank

Financial Services

The underserved are looking for new financial products and services. Banks and other 

institutions are looking for partners with unique assets and capabilities. By offering a 

suite of non-bank financial services, the Postal Service could help give both groups 

what they are looking for. Utilizing public-private partnerships, a financial services 

platform offered by the Postal Service could serve as a critical physical link for 

customers in every community, providing a bridge to 21st century electronic 

transactions. The 2006 Postal Accountability and Enhancement Act (PAEA) generally 

prohibits the Postal Service from offering new nonpostal services.

37 However, given that 

the Postal Service is already providing money orders and other types of non-bank 

financial services, it could explore additional options within its existing authority.

 32 Some examples include the Federal Deposit Insurance Act of 1950, the 1968 Consumer Credit Protection Act, the 

1977 Community Reinvestment Act, the Credit CARD Act of 2009, and the 2010 Dodd-Frank Wall Street Reform & 

Consumer Protection Act.

33 USPS OIG, Meeting America’s Emerging Communications Needs, RARC-WP-12-009, April 27, 2012, 

https://www.uspsoig.gov/sites/default/files/document-library-files/2013/rarc-wp-12-009.pdf, p. 12. 34 UPU, Development Strategies for the Postal Sector: An Economic Perspective, 2013, p. 28. 35 Ibid.; Consumer Postal Council, Universal Postal Service in Major Economies, November 2013, 

http://www.postalconsumers.org/uploads/1/Universal_Postal_Service_Nov_13_Final_02_DS.pdf, p. i; and UPU, 

Development of Postal Services in 2012, October 2013, 

http://www.upu.int/fileadmin/documentsFiles/resources/postalStatistics/results2012PostalStatisticsEn.pdf, p. 22. 36 For information on public-private partnerships, see U.S. Postal Service Office of Inspector General, Public-Private 

Partnerships: Best Practices and Opportunities for the Postal Service, RARC-WP-13-011, June 24, 2013, 

http://www.uspsoig.gov/sites/default/files/document-library-files/2013/rarc-wp-13-011.pdf. 37 39 U.S.C § 404(e)(2).

Postal financial 

services are the 

single best 

opportunity for 

new revenue. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

10

Postal financial services largely fall into three basic categories: payment services, ways 

to encourage savings, and credit services. Examples of services the Postal Service 

could offer in each category are discussed below. For information on additional potential

services, please see Appendix B.

Payment Services

Payment services are likely the products with the lowest barriers to entry for the Postal 

Service, as they are the most similar to what the organization already offers. They 

generally do not require a major capital investment, and are full of opportunities to 

partner with banks. These payment services might include electronic money orders, bill 

payments, facilitating e-commerce payments, and other services.

A cornerstone of this product line could be a Postal Service branded open-loop 

reloadable prepaid card, perhaps called the Postal Card (see Figure 5).

38 Users could 

load cash or their paychecks onto the card, and then use it to withdraw cash, pay bills, 

and send or receive international remittances. With the development of highly secure 

identity verification systems and partnerships with government at the local, state, and 

federal levels, the cards also could send or receive tax payments and refunds, as well 

as handle other government-to-citizen or citizen-to-government payments. Such a 

product would not only help reduce the government costs associated with cash and 

check payments, it also would help fulfill the goal of bringing the underserved into the 

mainstream financial fold. The funds on Postal Cards could be covered by the FDIC 

insurance of a partner bank.

Figure 5: Postal Card as Linchpin to Financial Offerings

For the dwindling number of consumers with paper checks, the Postal Service could 

offer basic check cashing services, with the option to put the money on a Postal Card.39

Post Offices also could be equipped with automated teller machines (ATMs) where 

customers can withdraw or add money to their cards. The Postal Card also could be 

 38 For more information on Postal Service payment cards, as well as related payment services and digital currencies, 

see USPS OIG, Digital Currency: Opportunities for the Postal Service, RARC-WP-12-001, October 3, 2011, and

USPS OIG, The USPS Global Card: A Conceptual Analysis of a Smart Card Platform, RARC-WP-12-006, February 

13, 2012.

39 Federal Reserve System, The 2010 Federal Reserve Payments Study - Noncash Payment Trends in the United 

States: 2006 – 2009, 2011, http://www.frbservices.org/files/communications/pdf/research/2010_payments_study.pdf,

p. 11. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

11

tied to a major surcharge-free ATM network, which would allow customers to withdraw 

cash from tens of thousands of ATMs nationwide without paying a fee.

In addition, the Postal Service could integrate online and mobile technologies with the 

payment services. People could log into their online Postal Service prepaid card 

account to check balances, transfer funds, pay bills, and so on. A smartphone app could 

allow customers to load paper checks onto their card by taking a picture of the checks

with their phone, just like they can at most major banks.

Reloadable prepaid cards are soaring in popularity with the underserved, who like the 

convenience the cards provide.

40 Consumers used prepaid cards for $9.2 billion in 

purchases in 2012, up 56 percent from 2009.41 However, the prepaid card market is 

highly fragmented, with many large and small players offering cards with a range of 

features. Many cards come with high fees that can sting unsavvy consumers. There is 

room in the marketplace for the Postal Service to offer a more transparent, affordable

option that is tied to a ubiquitous physical distribution network of Post Offices, likely in 

partnership with banks.

Products to Encourage Savings

As part of its suite of products, the Postal Service could partner with a bank to offer an 

interest-bearing savings feature on the Postal Card, which would encourage the 

underserved to build up a reserve for emergencies or to save for big purchases, such as 

a home or car. The Postal Service also could incentivize customers to divert a small 

portion of each paycheck into a savings vehicle tied to their card.

Many Americans do not have enough money saved to help them through a crisis. In 

fact, only half of American adults have readily available savings to cover their expenses 

for 3 months or longer. Twenty-seven percent of American adults have no emergency 

savings whatsoever.42 This widespread lack of savings leaves many people highly 

vulnerable.

Research shows that the underserved tend to have significantly less savings than the 

fully banked. However, this is largely due to a lack of disposable income among the 

underserved, whose regular monthly expenses essentially account for their entire 

paycheck. In fact, 25 percent of adults who work full-time do not make enough money to 

meet the basic needs of their families.43 Through less expensive financial products and

a savings feature linked to the Postal Card, the Postal Service could help bring 

 40 See Bretton Woods, Inc., Analysis of Branded General Purpose Reloadable Prepaid Cards, Basic Checking 

Accounts and Check Cashing, February 2012; Robert M. Hunt, et. al., for the Federal Reserve Bank of Philadelphia; 

CFSI, Consumers’ Use of Prepaid Cards: A Transaction-Based Analysis, August 2012; Mercator Advisory Group, 

U.S. Prepaid Cards Market Forecasts, 2012-2015, October 2012; and FDIC 2011 National Survey of Unbanked and 

Underbanked Households, p. 35. 41 Federal Reserve System, The 2013 Federal Reserve Payments Study, December 19, 2013, 

http://www.frbservices.org/files/communications/pdf/research/2013_payments_study_summary.pdf, p. 12. 42 Bankrate, June 2013 Financial Security Index Charts, http://www.bankrate.com/finance/consumer-index/financialsecurity-charts-0613.aspx. 43 CFPB, Empowering Low Income and Economically Vulnerable Consumers, November 2013,

http://files.consumerfinance.gov/f/201311_cfpb_report_empowering-economically-vulnerable-consumers.pdf, p. 39.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

12

An affordable loan 

from the Postal 

Service could 

save American 

families from 

having to depend 

on costly services 

like payday loans.

significant financial stability to millions of Americans, allowing them to pay their bills and 

avoid eviction, foreclosure, and other socially and economically expensive ills. This, in 

turn, would help the underserved improve their credit, so that they could one day join 

the ranks of the fully banked by moving to a traditional savings or checking account.

Credit Services

Generally, banks do not make small personal loans — even to highly creditworthy 

borrowers. That is because small loans cost about as much to underwrite and service 

as larger loans, but bring in a fraction of the revenue. So when someone needs a few 

hundred dollars to pay for an unexpected expense, they instead turn to credit cards. 

However, the underserved (and especially the unbanked) often 

cannot get credit cards because they have bad or nonexistent 

credit histories, which make them a high credit risk under 

typical underwriting models. 

Without access to traditional credit, the underserved often turn

to alternative lenders, which charge high interest rates, fees, or 

both in part to compensate for the riskiness of their borrowers, 

who are more likely to default on their loans.

44 Generally, 

payday lenders require borrowers to have a checking account. 

This leaves the unbanked with even fewer options for credit, forcing them to go to 

pawnshops or even loan sharks.45

In this landscape with scant affordable lending options for the underserved, the Postal 

Service has a tremendous opportunity to offer small loans that could save borrowers a 

lot of money — billions of dollars when aggregated across all potential users — which 

they could spend on more productive things like rent, groceries, utilities, and mortgage 

and student loan payments. This would, in turn, help the overall economy.

Here is a purely hypothetical example of how a “Postal Loan” could work. Postal Loans 

would be available to people who have their paychecks directly loaded onto their Postal 

Service prepaid card (this also could be for government payments, such as Social 

Security or disability benefits) and have received at least two straight payments. For 

those whose employers do not offer electronic transfer, they could be eligible for a loan 

if they load at least two consecutive paychecks onto a Postal Service prepaid card.46

 44 The Consumer Financial Protection Bureau (CFPB) has begun to issue regulations affecting alternative financial 

services. For more information, see http://www.consumerfinance.gov/regulations/. See also Congressional Research 

Service, The Consumer Financial Protection Bureau (CFPB): A Legal Analysis, 2012, and A Brief Overview of 

Actions Taken by the Consumer Financial Protection Bureau (CFPB) in Its First Year, 2012. 45 A loan shark is “a moneylender who charges extremely high rates of interest, typically under illegal conditions.” See 

http://www.oxforddictionaries.com/us/definition/american_english/loan-shark. 46 Ideally, front line Postal Service employees would collect and verify borrowers’ information and identities, but would 

not make credit decisions. Such decisions would be made by a computer model and overseen by financial experts.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

13

People could borrow up to 50

percent of their gross paycheck. 

For a person who earns $18,000 

per year and gets paid twice a 

month, that is $375. Every 

borrower could be required to 

pay a minimum of 5 percent of 

their gross pay from each 

paycheck until the loan is paid 

off. In this scenario, that would 

be $38 from each paycheck.47

The Postal Service would 

automatically withhold loan 

payments from borrowers’ 

paychecks before putting the 

difference on their Postal Card. If 

the Postal Service charged a $25 

upfront loan fee and a 25 percent 

interest rate, the borrower would 

pay off the loan in 5 1⁄2 months, 

paying a total of $48 in interest 

and fees across the life of the 

loan.48

That is less than a tenth of the fees charged for a typical payday loan of the same size 

(see Figure 6).49 That single loan from the Postal Service could effectively put $472 

back into a consumer’s pocket, which he or she could then use on more economically 

productive expenses. If even one-tenth of the 12 million Americans who take out a 

payday loan each year got this hypothetical Postal Loan instead, they could collectively 

save more than half a billion dollars a year in fees and 

interest.50 And that is to say nothing of the benefits 

Postal Loans could bring to the 10 million unbanked 

U.S. households which cannot even get payday loans.

What happens if a Postal Loan borrower stops making 

payments on her loan? After diligent follow-up, the 

Postal Service could potentially utilize the Treasury 

 47 Studies show that most payday borrowers can afford to pay no more than 5 percent of their income toward debt 

payments and still have enough money left over to cover their expenses. For more information, see Pew Charitable 

Trusts’ Safe Small-Dollar Loans Research Project. 48 Based on two paychecks a month. When including fees, the effective annual interest rate would be 28 percent, 

using the payday lending method of interest calculation. While this is a higher rate than a traditional consumer loan, it 

is significantly lower than virtually all other options available to those who do not qualify for traditional credit. 

However, the rate reflects the inherent challenges in dealing with a high-risk segment of consumers. This interest rate 

is hypothetical and only intended to serve as an illustrative example. The Postal Service would need to ensure that 

rates and other conditions for loans or advances comply with all applicable laws and regulations. 49 Pew Charitable Trusts, Payday Lending in America: Who Borrows, Where They Borrow, and Why, p. 4. 50 Ibid.

Postal Loans could save 

Americans hundreds of 

millions of dollars each 

year, money they 

currently spend on paying 

high fees and interest. 

Figure 6: Payday vs. Postal Loans

A PAYDAY LOAN ALTERNATIVE

The average payday loan of $375 costs consumers an 

average of $520 over the life of the loan. A postal loan 

for the same amount could cost just $48, leaving 

already cash-strapped borrowers with more money in 

their pockets to pay other bills and lift themselves up 

by their own bootstraps.

Payday Postal

Loan amount $375 $375

Average months to repay 4.5 5.5

Average bi-monthly payment $99 $38

Total interest and fees $520 $48

Effective annual interest rate* 391% 28%

*Formula used to translate payday fees into an annual 

interest rate: (Interest & Fees / Loan Amount) / 

(Loan Days / 365) * 100.

Source: Pew Charitable Trusts, Safe Small-Dollar Loans 

Research Project, 2013.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

14

Department’s offset program, which allows federal agencies to collect debts from the tax 

refunds of debtors.51 Because a high proportion of the “working poor” get tax refunds —

including many people who would be prospective Postal Loan borrowers — this 

collateral could serve as a built-in insurance policy that would significantly reduce the 

risk that Postal Loans would go unpaid.52 While testing, experimentation, and review 

would be required, this potential risk reduction could allow the Postal Service to offer 

loans to otherwise high-risk borrowers at affordable rates.

There is a wide range of consumers who need access to small-dollar credit, and the 

Postal Loan could strongly appeal to these different types of borrowers. For example, 

people whose income varies throughout the year, consumers with no other avenues to 

credit, families with unexpected expenses, and others. In addition, because of the 

unique strengths and capabilities of the Postal Service, the Postal Loan would likely 

meet key criteria for being a high quality loan, such as affordability, transparency, fair 

pricing, a structure that does not depend on repeat borrowing, and helping customers to 

build up their credit.53

To help fund credit products, the Postal Service could rely on partnerships with banks or 

other institutions, which could hold Postal Loans on their books. 

Postal Financial Services Would Have Clear Benefits

Were the Postal Service to expand its financial services offerings, there would be three 

key beneficiaries: the American public (especially the underserved), the financial 

services community, and the Postal Service itself.

Benefits for the Public

For the most vulnerable Americans — including many of the 

underserved — the difference between making it and not is a 

small amount of money. Among the 1.1 million people who 

filed for personal bankruptcy in 2012, their median average 

income of $2,743 a month was just $26 less than their median 

average monthly expenses.54 Put another way, these people 

were just $26 a month away from making ends meet.

 51 Specific details about participation and implementation would need to be resolved. 52 While the data are a bit murky (agencies report the numbers in somewhat different ways), it appears that the vast 

majority of the working poor file federal tax returns. Using the wage percentile benchmarks for 820 occupations listed 

in the Bureau of Labor Statistics’ May 2012 Occupational Employment Statistics survey, we calculate that there are 

about 32 million employees, or about 25 percent of wage earners, who earn less than $25,000 per year. Internal 

Revenue Service (IRS) data show that, among those reporting less than $25,000 a year in income, about 70 million 

people filed a tax return in 2011. This includes people who did not earn a “wage,” but who still filed a return. Of this 

group, 82 percent of filers got a refund averaging $1,562, according to the IRS. 53 Nicholas Bianchi and Rob Levy, Center for Financial Services Innovation, Know Your Borrower: The Four Need 

Cases of Small-Dollar Credit Consumers, December 2013, 

http://www.cfsinnovation.com/CFSI_KnowYourBorrower.pdf p. 6. 54 Administrative Office of the United States Courts, 2012 Report of Statistics Required by the Bankruptcy Abuse 

Prevention and Consumer Protection Act of 2005, 2013, 

http://www.uscourts.gov/uscourts/Statistics/BankruptcyStatistics/BAPCPA/2012/BAPCPA-report.pdf, p. 44.

On average, 

Americans who fell 

into bankruptcy in 

2012 were only $26 

a month away from 

staying afloat. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

15

As mentioned above, the Postal Loan product outlined in this paper could, by itself, 

save the average payday loan borrower more than $100 a month in fees and interest. 

With this kind of cost savings, users of postal financial services would have much more 

financial security. If this helped decrease personal bankruptcies by just 5 percent, it 

would not only help more than 50,000 people a year avoid the lasting stigma and 

financial effects of bankruptcy, it also would potentially keep some $10 billion a year in 

loans and other debts from being dragged through bankruptcy court, where much of it 

would be canceled at tremendous expense to creditors (most of whom are financial 

institutions).55 That would be good for American families, for banks, and for the entire 

country.

Because the underserved tend to spend nearly every penny they make, any money they 

save by using Postal Service financial products would immediately go back into the 

economy. They would spend it on groceries, gasoline, utilities, medical bills, and 

entertainment. Businesses small and large would benefit.

Benefits for the Financial Services Community

To be clear, the Postal Service should not aim to take customers away from mainstream 

banks and credit unions. To the contrary, the mainstream financial services community 

would be a beneficiary of a successful suite of postal financial services and products for 

three key reasons: partnerships, payments, and new customers. Moreover, the target 

market for postal financial services consists of people who are not currently a major 

focus of banks. In fact, cooperating with trusted nonfinancial entities helps financial 

institutions reach more low-income consumers.56

Partnerships: The Postal Service would rely on the financial sector to provide the backend for some of these services, including providing Postal Cards, setting up and 

managing web and mobile access, servicing the accounts and loans, and possibly 

funding and holding the loans on their balance sheets. This could add up to substantial 

new revenue for the Postal Service’s financial institution partners.

Payments: When people fall off the financial cliff, they 

typically stop paying many of their bills, including their 

credit cards, auto loans, and mortgages. If the Postal 

Service’s financial services initiative were to succeed, a 

key outcome would be that the underserved would 

stumble far less often. That means they could continue

making payments to the bank. For example, Internal 

Revenue Service figures show that in 2011, individual taxpayers reported $6.7 billion in 

canceled debt from foreclosure, repossessions, and the like.57 If just 5 percent of this 

canceled debt was avoided, it could help lenders save some $335 million a year in 

 55 Based on $208 billion in discharged personal bankruptcy debts in 2012. Ibid., p. 28. 56 CFPB, Empowering Low Income and Economically Vulnerable Consumers, p. 32. 57 IRS Individual Statistical Tables, Table 2.1 Returns with Itemized Deductions: Sources of Income, Adjustments, 

Itemized Deductions by Type, Exemptions, and Tax Items, by Size of Adjusted Gross Income, Tax Year 2011, 

http://www.irs.gov/file_source/pub/irs-soi/11in21id.xls.

Postal financial services 

could result in millions of 

new customers and 

tremendous revenue for 

banks that partner with 

the Postal Service. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

16

write-offs — not to mention countless other millions of dollars in collection costs and 

legal and administrative fees.

New customers: Postal financial services could help bring financial stability to many 

families. As the underserved become more financially stable, they will be in a better 

position to pay off past debts and clean up their credit histories. As their credit improves, 

some of them could graduate to fully banked status, qualifying for mainstream checking 

and savings accounts, credit cards, auto loans, and home mortgages. In short, postal 

financial services could help create more full-fledged customers for banks.

Benefits for the Postal Service

Financial services are hugely profitable for postal 

organizations around the world. Whether using a 

fully chartered “postal bank” or partnering with 

private institutions, postal financial services 

account for a major portion of postal profits and 

revenue in many countries. For more on the 

financial services offerings of foreign posts, 

please see Appendix C.

To get a ballpark figure, one can look at revenues

in terms of the size of the alternative financial 

services market in the United States. If 10 

percent of the $89 billion spent on alternative 

financial services was instead spent at the Postal 

Service, it could bring in $8.9 billion a year. That

amount would be in line with the results seen by 

other industrialized countries. In 2012, postal 

financial services made up an average of 14.5 

percent of their total revenue. For the U.S. Postal 

Service, that percentage would translate to $9.5 

billion in additional revenue.58 In addition, the 

alternative financial services market is expected 

to continue growing in the coming years, and is

“ripe for innovation.”59

As an alternative to high-level estimates for an 

overall suite of financial services, one can look at 

potential revenue through estimates of what 

individual products or services could bring in.

Consider prepaid cards, for example. The fees they generate can vary widely, 

depending on a customer’s particular habits. A study by the Pew Charitable Trusts 

 58 Based on 2012 operating revenue of $65.2 billion, 

http://www.prc.gov/Docs/85/85646/2012_USPS_%20FORM_10K_FINAL.pdf. 59 Eva Wolkowitz, “2012 Financially Underserved Market Size Study,” CFSI landing page, December 2013, 

http://www.cfsinnovation.com/content/2012-financially-underserved-market-sizing-study.

$82 

$89 

$95 

2011 2012 *2013

A GROWING MARKET

The underserved paid $89 billion in 

financial fees and interest in 2012, 

and projections suggest the market 

may have topped $95 billion in 2013. 

As the market grows, it represents an 

ever-greater opportunity for the 

Postal Service. 

Fees and interest, in billions

*Projected

Source: CFSI 2012 Financially 

Underserved Market Size 

Study.

Figure 7: The Growth of the 

Underserved Market
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

17

showed that inexperienced consumers, who make heavy use of prepaid card services 

without regard for fees, spend a median of $32.60 a month on prepaid card fees, 

including monthly service charges, ATMs, retail purchases, and other fees. Consumers

who take more care to avoid fees can pay significantly less.

60 The Postal Card could 

come with fewer and lower fees than others, bringing in an average of, perhaps, $15 a 

month in fee revenue per consumer. At that rate, if 10 percent of the 68 million 

underserved Americans used the Postal Card, the card alone would bring in $1.2 billion 

a year in revenue.

Financial services also could help maintain the viability of the Postal Service’s retail 

network.

Strategic Considerations for the Postal Service

In order to expand its presence in the financial services market, the Postal Service 

needs a solid strategy, based, in part, on some of the lessons learned from international 

posts, the banking industry, and others. We offer here some considerations for the 

Postal Service on how it could lay the groundwork for an effective suite of postal 

financial services. This work is not in any way intended to be a business plan, which 

would be necessary for the Postal Service to closely examine the potential costs, 

revenue, and other details for any new services. The Postal Service also should 

consider creating a dedicated group — perhaps consisting of experienced financial 

sector executives — to research, implement, and manage financial products and 

services.

Timing is a Critical Factor

The Postal Service should carefully consider the timing with which it introduces any new 

postal financial services. Some types of products or services may require relatively 

lengthy development and rollout periods. However, a quick victory or two could help 

garner stakeholder support for implementing additional postal financial services.

Electronic payment products like Postal Cards might be 

a wise entry point, and would expand upon existing 

services like paper money orders. These types of 

services could immediately result in increased foot 

traffic and new revenue. And to the extent that these 

services are expansions of existing offerings, the 

changes required within the Postal Service would be 

minimal compared to more complex financial services. 

Moreover, these services could build off the Postal 

Service’s current network and infrastructure.

 60 Pew Charitable Trusts, Loaded with Uncertainty: Are Prepaid Cards a Smart Alternative to Checking Accounts?, 

September 2012, http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Prepaid_Checking_report.pdf, pp. 18-

20.

Pilot tests in targeted 

areas could prove the 

value of postal financial 

services. A quick victory 

or two could help gain 

support for additional 

services in the future.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

18

It may be best for the Postal Service to introduce products through pilot programs or 

market tests in a small number of Post Offices in select geographic areas. If the new 

services are successful in these limited tests, the Postal Service could expand the 

offering to include additional Post Offices and locations. Some products might have 

ready-made target audiences in certain locations, such as areas with large immigrant 

communities.

Consider Partnerships with the Private Sector

The Postal Service could create a “win-win” situation by partnering with banks and other 

organizations to provide financial products and services to new customers. Postal 

financial services could complement the current offerings from banks by helping banks

reach customers in new geographic areas, by offering products to customers who were 

not previously a main focus of banks, and by helping some customers transition to 

traditional savings or checking accounts. Moreover, a partnership would highlight what 

each partner brings to the table. The Postal Service offers trust, a vast physical network, 

and other critical assets. Banks offer reliability, expertise, and competence when it 

comes to financial transactions. They also could provide valuable knowledge that could 

help the Postal Service structure new offerings. The end results could be new services 

for customers, more revenue for banks, and an easier way for the Postal Service to 

expand its presence in the financial services market. In addition, the right partners could 

bring much needed startup cash to the table as part of the deal, overcoming the Postal 

Service’s current funding limitations.

To start, the Postal Service should identify which financial products and services would 

best be offered through partnerships. Some partnerships might be most effective if they 

included multiple banks or other institutions. Different products will likely call for different 

partners as well, based on the needs of the potential customers and the service gap the 

partners are trying to fill. One important note of caution: the Postal Service should be 

very mindful to ensure that no partnership damages its reputation. The level of trust the 

Postal Service has earned from the public is an unmatched asset, and one that should 

not be jeopardized.

Identify and Understand Key Customers

Although some financial products and services offered by the Postal Service could 

appeal to segments of the broader market, most of these offerings would be especially 

attractive to the underserved. As discussed above, the underserved have a wide range 

of needs and characteristics. Understanding the varying needs of different customers 

will be crucial for postal financial services to succeed. For example, some services may 

appeal to young consumers or those who are not native English speakers. As such, 

marketing toward these consumers should be designed so that it addresses their 

specific needs and clearly signals that the Postal Service and its partners are listening 

to what these consumers want. The FDIC’s surveys of banks on their efforts to reach 

the underserved could provide useful tips on how best to serve specific customer 

segments.61 In addition, many alternative financial services providers have been highly 

 61 See http://www.fdic.gov/unbankedsurveys/.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

19

successful in reaching underserved markets, and their success stories could provide 

useful lessons.

Monitor and Respond to Emerging Trends

The market is changing rapidly and the Postal Service should keep an eye on key 

trends to ensure that it positions itself effectively to meet a variety of potential future 

scenarios. Depending on the outcomes of these trends, the Postal Service could either 

be well positioned or scrambling to catch up.

Cashless Economy and Mobile Banking

The United States is moving toward a cashless economy. A 2012 Rasmussen Reports

poll confirmed Americans’ dwindling reliance on physical currency: 43 percent had gone 

a full week without paying for anything with cash or coins.62 A suite of financial services 

and products would help the Postal Service to meet the needs of customers in this

increasingly cashless economy and allow it to adapt in a rapidly evolving market.

Even with the rush to adopt cashless payment options, one 

big question remains: what will happen to the underserved 

in this cashless economy? People without access to 

payment cards cannot participate in e-commerce or other 

aspects of the digital economy. Many of the underserved 

— especially those who are unbanked — prefer or are 

confined to using cash for nearly all of their transactions. 

For these consumers, the Postal Service could provide 

easy and convenient ways for them to convert their cash to 

digital currency or other electronic payment methods. And 

it is not just the underserved who are sticking to cash; some young Americans choose 

to use cash because they want to avoid taking on debt.63 In addition, many businesses 

have stopped even accepting credit cards after banks increased the fees associated 

with processing transactions.

64 These large increases in fees may be especially 

challenging in struggling communities, where businesses may have difficulty passing

the costs along to their customers.

Related to the rise of a cashless economy is the growth of mobile banking, which is

fueled by the spread of smartphones. According to Federal Reserve research, 59 

percent of the unbanked and 90 percent of the underbanked have a mobile phone, 

roughly half of which are smartphones. Moreover, 49 percent of underbanked 

consumers reported using mobile banking in the past 12 months.65

 62 Sarah Todd, “Got Cash? Not for Long.,” American Institute for Economic Research, June 14, 2012, 

https://www.aier.org/article/7672-got-cash-not-long. 63 Rachel Sapin, “Credit-shy: Younger generation is more likely to stick to a cash-only policy,” Denver Post, August 

26, 2013, http://www.denverpost.com/styleheadlines/ci_23929523/credit-shy-younger-generation-stick-cash-onlypolicy. 64 David Lazarus, “Some merchants stop taking credit cards because of high fees,” Los Angeles Times, July 1, 2011, 

http://articles.latimes.com/print/2011/jul/01/business/la-fi-lazarus-20110701. 65 Board of Governors of the Federal Reserve System, Consumers and Mobile Financial Services 2013, March 2013, 

http://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201303.pdf, p. 2.

We are living in an 

increasingly 

cashless economy. 

The Postal Service 

can help the 

underserved 

function in this new 

landscape. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

20

Adapting to New Financial Regulations

New regulations could alter the financial services landscape and potentially lead to an 

increase in the number of customers looking for new solutions. The 2010 Dodd–Frank 

Wall Street Reform and Consumer Protection Act was seen as the most far-reaching 

piece of legislation in the financial sector since 1933’s Glass–Steagall Act. However, 

only about half of the hundreds of provisions required under Dodd-Frank have taken 

effect.66 One of the completed results of Dodd-Frank is the establishment of the 

Consumer Financial Protection Bureau (CFPB). Among other things, the CFPB has 

regulatory authority over many non-bank financial institutions, such as payday lenders. 

These institutions were not previously subject to such federal regulatory control. 

These regulatory developments could affect the Postal Service in at least two ways. 

First, they could directly affect existing and potential financial products and services 

offered by the Postal Service. Second, there could be a role for the Postal Service to 

play in helping banks and other institutions to comply with regulations. For example, the 

Postal Service might explore whether banks that partner with it could earn credit toward 

fulfilling their requirements under the 1977 Community Reinvestment Act to meet the 

credit needs of the communities where they operate.

67 This might be especially helpful 

for community or local institutions that have fewer resources to dedicate to ensuring 

compliance with new and changing regulations.

The UPU International Financial System Might Offer Advantages

Another possible way for the Postal Service to expand its financial services offerings 

could be joining the International Financial System (IFS) of the Universal Postal Union 

(UPU). The IFS is a software application developed by the UPU for the secure and 

expedient electronic transfer of international and domestic money orders. It supports a 

variety of fund transfer services, including cash and account-based money orders, and 

urgent wire transfers. Currently, the IFS network includes postal operators in at least 60

countries.68 By using this platform, global posts can 

avoid developing their own system for such payments, 

which could result in shorter implementation time and 

lower costs.

There is a huge market opportunity for secure 

international money transfers in the United States:

migrant remittance outflows in the United States grew 

 66 U.S. Government Accountability Office, Financial Regulatory Reform: Regulators Have Faced Challenges 

Finalizing Key Reforms and Unaddressed Areas Pose Potential Risks, Report to Congressional Addressees No. 

GAO-13-195, January 2013, http://www.gao.gov/assets/660/651401.pdf, p. 5. 67 Federal Reserve, About the Community Reinvestment Act, 

http://www.federalreserve.gov/communitydev/cra_about.htm. 68 UPU, Electronic Money Order, http://www.ptc.upu.int/ps/ifs.shtml, and Bishar A. Hussein, Director General for the 

UPU, “Opening address to the Postal financial services conference, Paris, France,” February 28, 2013

http://actualites.upu.int/actualites/discours/upu-la-poste-conference/. According to UPU officials we spoke with, the 

UPU is currently working on integrating additional features able to support mobile and e-commerce payments. 

Personal communications, July through October 2013.

The UPU’s International 

Financial System could be 

an effective and low-cost 

way for the Postal Service 

to offer new electronic 

money transfers. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

21

from $35 billion in 2000 to more than $51 billion in 2012.69 The IFS could provide the 

opportunity for the Postal Service to offer new channels for international money 

transfers — beyond just paper money orders and the Dinero Seguro service — and 

expand the geographical reach of its money transfers. In addition, the IFS could provide 

a safer and faster digital alternative to domestic and international paper money orders, 

without requiring the Postal Service to be responsible for the back-end operations.

There is a growing need for ways to send money abroad, and the Postal Service could 

play a much bigger role in helping to fulfill that need.

As with any new endeavor, there are implementation considerations. The Postal Service 

would need to make sure that the IFS complies with all necessary laws and regulations, 

and that the service could be offered profitably without slowing down transactions. Even 

though the Postal Service has previously looked into the IFS and decided not to 

implement it, times have changed. A fresh look may be in order. Among the many 

reasons, the IFS might help the Postal Service to serve a quickly growing population in 

the United States: foreign-born individuals.70 Between 2000 and 2011, the foreign-born 

population grew from 31.1 million to 40.4 million.71 The Postal Service’s participation in 

the IFS could be valuable as this number continues to grow.

Conclusion

Underserved Americans need financial services that work for them, especially in today’s 

tough economy. The Postal Service is in an excellent and, in some ways, unmatched 

position to meet these citizens’ needs. A suite of non-bank financial services offered 

through the Postal Service — available online, through mobile devices, and at Post 

Offices in every community — could greatly benefit families everywhere. Postal financial 

services could help American families to save money through avoiding exorbitant fees

and interest. This would make it easier for these families to pay their bills on time, build 

up a more comfortable level of savings, and spend their money in better ways — which 

would benefit the economy overall. And someday, many of these same families might 

be able to open a traditional bank savings or checking account. In addition, as shown by 

postal organizations all across the globe, moving into financial services has been the 

best way for posts to shore up their retail networks and find new revenue. As the Postal 

Service continues to look for new ways to serve the citizens of the 21st century, nonbank financial services may be the “killer app” for diversifying its revenue base.

 69 World Bank, Migrant Remittance Outflows, 2013, 

http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-

1288990760745/RemittanceData_Outflows_Oct2013.xls. 70 The Bureau of Labor Statistics defines foreign-born persons as “persons who reside in the United States but who 

were born outside the country or one of its outlying areas to parents who were not U.S. citizens. The foreign born 

include legally-admitted immigrants, refugees, temporary residents such as students and temporary workers, and 

undocumented immigrants.” For more information, see http://www.bls.gov/news.release/pdf/forbrn.pdf. 71 Pew Hispanic Center, Statistical Portrait of the Foreign-Born Population in the United States, 2011, 2013, 

http://www.pewhispanic.org/files/2013/01/PHC-2011-FB-Stat-Profiles.xlsx. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

22

Appendix A The Postal Savings System

The History of the Postal Savings System

The Post Office Department offered savings accounts for decades, from the early 20th

century until the late 1960s. The system found a niche among immigrant populations 

and provided readily available access to basic financial products for all Americans. 

However, interest waned over the decades of its operation, eventually leading Congress 

to discontinue the program.

Origins and Design

From 1911 to 1967, the Postal Savings System gave people the opportunity to make 

savings deposits at designated Post Offices nationwide. In establishing the system, 

Congress intended to encourage people to save their money in banks rather than under 

their mattresses, bring in savings from immigrants who may have used post offices for 

savings in their native counties, provide for a safe place for individuals to deposit their 

money, and create a deposits system that was more convenient for the public. Initial 

banking industry opposition to the system turned into support when bankers realized 

that the system was successfully drawing in a lot of money that used to be stored away 

in cookie jars and other hidden places.

72

To minimize competition with banks, deposits were limited to $500 and the interest rate 

to 2 percent. Deposited funds were to be funneled to local banks, which would pay a 

2.25 percent interest rate for the money — considerably less than the 3.5 percent that 

most banks were paying for deposits at that time, and lower than the interest paid to 

depositors by any other post in the world.73 Because banks would use the postal 

deposits to fund loans to local consumers and businesses, the economic benefits of 

those deposits stayed with local communities. Banks found they had little reason to 

oppose an institution providing them a source of cheap money, so not much controversy 

surrounded increases in deposit limits to $1,000 in 1916 and $2,500 in 1918. The 2 

percent interest rate for depositors was never changed, but the 2.25 percent rate paid 

by banks to the Postal Savings System was raised to 2.5 percent in 1934.74

Growth and Decline

Throughout the decades of its operation, the Postal Savings System had its ups and 

downs in popularity. Deposits grew slowly for the first 20 years, and throughout that 

period never amounted to more than 1 percent of the total amount in savings and time 

accounts in the banking system. The situation changed in the 1930s, when many banks 

failed during the Great Depression, and the Postal Savings System was perceived as

 72 U.S. Postal Service, Postal Savings System. 73 Patricia Hagan Kuwayama, “Postal Banking in the United States and Japan: A Comparative Analysis,” Monetary 

and Economic Studies, May, 2000, http://www.imes.boj.or.jp/research/papers/english/me18-1-3.pdf, p. 78. For 

example, the United Kingdom paid 2.5 percent; Canada, Austria, and Hungary paid 3 percent; and Japan paid 4.2 

percent in tax-free interest, although in general interest rates were higher in the United States than in any of these 

countries. E.W. Kemmerer, “The United States Postal Savings Bank,” Political Science Quarterly, vol. 26, no.3, 

September, 1911, p. 485. 74 Patricia Hagan Kuwayama, “Postal Banking in the United States and Japan: A Comparative Analysis,” p. 78.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

23

uniquely safe and reliable before the government established bank deposit insurance. A 

second surge in deposits came in the 1940s, when the 2 percent interest paid by the 

postal system to depositors was higher than the rates banks were paying.75 The system 

hit its peak in 1947 with nearly $3.4 billion in savings deposits from more than 4 million 

customers using more than 8,100 postal units.76

Usage of the Postal Savings System dropped over the next couple of decades due to 

several factors, including increased interest rates from traditional retail banks for 

savings deposits. As explained in the Postal Service’s official history: “after the war, 

banks raised their interest rates and began offering the same governmental guarantee 

as the Postal Savings System. In addition, United States savings bonds gave higher 

interest rates. Deposits in the Postal Savings System declined, dropping to $416 million 

by 1964.”77 The Postal Savings System ended on July 1, 1967.78

Who Used It?

One particularly interesting fact about the Postal Savings System was its popularity 

among recent immigrants to the United States during the early 20th century. These 

immigrants embraced the system much more than non-immigrants. For example, in 

1915, fully 71.8 percent of the total deposits in the system belonged to foreign-born 

immigrants, even though they were only 14.3 percent of the overall U.S. population.79

The statistics are particularly stark when considered on a per capita basis. For example, 

Americans overall held an average of just 23 cents each in postal deposits in 1915, 

while Greek immigrants had an average of $11.70 and Russian immigrants (who held a 

fifth of all postal deposits) had an average of $7.85 each.80 One reason immigrants from 

southern and eastern Europe were partial to the Postal Savings System was the well–

publicized problems of informal “immigrant banks” that depended on cultural ties but 

often proved dishonest.81

 75 Ibid., p. 82. 76 U.S. Postal Service, Postal Savings System. 77 U.S. Postal Service, The United States Postal Service: An American History 1775-2006, November 2012, 

https://about.usps.com/publications/pub100.pdf, p. 29. 78 Ibid. 79 Patricia Hagan Kuwayama, “Postal Banking in the United States and Japan: A Comparative Analysis,” p. 80. 80 Ibid. 81 Ibid., pp. 80-81.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

24

Appendix B Examples of Postal Financial Services

The following table provides examples of postal financial services that might be 

considered by the Postal Service and its stakeholders. 

Table 1: Examples of Postal Financial Services

Service Description

E-commerce payments

The facilitation of e-commerce payments for the underserved, 

both domestic and cross-border. These payment methods could 

include credit cards, direct debit, mobile payments, wire transfers, 

and other payments. 

Bill payments Bills currently paid in cash at payday loan centers, retailers, and 

other locations.

Government-to-citizen 

payments

Payments made by government agencies to the unbanked by 

means other than direct deposit or prepaid cards.

Closed-loop prepaid cards Prepaid cards that can only be used at certain locations, such as 

gift cards for a specific store or group of stores.

Open-loop reloadable 

prepaid cards

Prepaid cards with a network logo (Visa, MasterCard, American 

Express, or Discover) and which can be used at any location that 

accepts that brand. Some of these cards have additional features, 

such as direct deposits or a link to a savings account.

Mobile financial services Use of mobile devices as a specific payment mechanism or as a 

channel of access to bank accounts.

Check cashing The cashing of underserved customers' checks for a fee.

Savings Encouraging customers to build up savings, possibly through 

savings features on prepaid cards.

Identity authentication

Identity authentication services for citizens, businesses, and 

financial institutions. This could include identity authentication 

features embedded into a Postal prepaid card, which would 

increase security and privacy in digital and physical transactions 

in support of e-commerce growth.*

Financial literacy Providing information on financial literacy, counseling, education, 

and other topics for the benefit of underserved consumers. 

 Source: Decision/Analysis Partners analysis provided to USPS OIG.

 *Note: For more information, see U.S. Postal Service Office of Inspector General, Digital Identity: Opportunities 

for the Postal Service, RARC-WP-12-011, http://www.uspsoig.gov/sites/default/files/document-libraryfiles/2013/RARC-WP-12-011.pdf. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

25

Appendix C Lessons Learned from International 

Posts 

Many international posts are already providing financial services, through which they 

have found new ways to meet customer needs and bring in additional revenue. 

Although there is no “one size fits all” model for introducing postal financial services, 

due to differences between countries and posts, there are common success factors and 

implementation strategies across 

multiple postal operators. Figure 8

shows the earnings obtained by 

several industrialized countries 

through postal financial services.

International Posts Are 

Succeeding at Financial 

Services

In March 2013, the UPU issued a 

report on the state of postal 

financial services development 

around the world (139 countries) 

and the role of postal operators in 

financial inclusion.82 The UPU found 

that posts are key players in 

advancing financial inclusion in 

most of its member countries, 

second only to banks.83 In addition, 

the UPU found that postal operators around the world often use their nationwide 

infrastructures to help ensure success for postal financial services. These vast footprints 

allow posts to maintain high volume and easy access for customers. Moreover, foreign 

posts are often already deeply integrated into community life.84

The UPU found that the business models adopted by postal operators for financial 

services varied widely. They ranged from relatively basic arrangements, like rental of 

post office space or offering simple transactional services, to more complex 

arrangements like transforming postal operators into full-fledged postal banks.85 Many 

postal operators followed more than one business models, and often retained basic 

models while progressing to more complex models.

 82 Alexandre Berthaud and Gisela Davico, Global Panorama on Postal Financial Inclusion: Business Models and Key 

Issues. 83 Ibid., p. 9. 84 Ibid, p. 7. 85 Ibid., pp. 9, 83.

FINANCIAL SERVICES DRIVE 

EARNINGS AT FOREIGN POSTS

For many posts abroad, financial services account 

for a large portion of sales and profits.

Country Financial services earnings

Switzerland 71% of operating profits

New Zealand 70% of profits

Italy 67% of profits

France 36% of pre-tax earnings

United Kingdom 25% of sales

Payday

Source: Canadian Centre for Policy Alternatives, Why 

Canada Needs Postal Banking.

Figure 8: Financial Services at Foreign Posts
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

26

The UPU also identified 10 common factors that have been critical to the success of 

postal financial services across the globe.86 Table 2 lists these success factors.

Table 2: How Have Posts Made Financial Services Successful?

Success Factor What Leads to Success?

Network

Does the network reach all across the country, including 

urban and rural areas? Are the different points in the network 

well connected? 

Staff Are staff properly trained? Are they computer literate? Do 

they offer high-quality customer service?

Financial capacity

Does the post have the resources to invest in upgrading its 

systems and training its staff? Is there enough cash moving 

through the network to cover financial transactions?

Trust Does the public trust the post? Does the post earn and 

maintain this level of trust?

Automation and process 

integration

Are there processes to guide critical functions, such as how 

much cash is in post office drawers and how often the cash 

should be replenished? Does the post have the right 

information technology?

Willingness to foster financial 

inclusion

Is there popular support behind using the post as a means to 

enhance financial inclusion?

Governance between the post and 

postal financial services

Is there an effective system in place to govern the 

relationship between the post and its postal financial 

services? Is it clear whether the postal financial services will 

be a part of the post or completely independent of the post?

Legal and regulatory framework

Is the post authorized to provide financial services, or to form 

partnerships with banks? Does the post have access to 

national payment systems? Can the post issue forms of 

electronic money?

Marketing Can the post effectively promote its products and brand? 

Does it understand its customers’ needs?

Flexibility

Does the post offer convenient hours of operation? Can 

customers get services close to home? Can the post adapt 

to customers’ changing needs?

Source: Alexandre Berthaud and Gisela Davico, Global Panorama on Postal Financial Inclusion: Business 

Models and Key Issues, UPU, March 2013.

Implementation Strategies of International Posts

One of the experts we contracted to research this project has real-life experience in 

assisting postal operators to implement financial services. That expert also identified 

success factors for international posts engaged in financial services. He found that one 

of the posts’ main strengths is their ability to reach out to a mass market, including lowincome and unbanked consumers. These consumers are typically not served by major 

 86 Ibid., p. 10.
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

27

banks, and the consumers often feel uncomfortable in the environment of a traditional 

bank branch. In addition, our expert found that international posts succeed at financial 

services when they engage in effective marketing campaigns and excel at dealing with 

consumers from a wide range of cultural backgrounds. 

Research has shown that postal financial services have 

resulted in significant revenues for some international 

posts, at the same time as revenue from other sources 

has continued to decline.87 This can help to maintain the 

vitality of postal networks. However, implementation is 

not as easy as flipping a switch. International posts used 

different implementation strategies to help ensure that 

their financial services were successful, including the 

following:

 Successful financial services complemented the established banking sector, 

rather than openly competed with it.88 In part, this has been done by focusing on 

niches that traditional banks generally do not prioritize.

 A diverse suite of financial services will help bring in additional customers, and 

can boost the viability of individual products or services that have a natural 

market but might not be profitable if offered on their own.

 Forming partnerships with established financial institutions lets posts focus and 

capitalize on their unique strengths, capabilities, and experience.

 While financial products and services may be best managed by a licensed, 

regulated bank partner, the operations should be overseen by a dedicated unit 

inside the post. 

 Transparency and accountability over fees, processes, and other critical aspects 

of financial services help posts to make their offerings appeal to customers who 

might be wary of doing business with some traditional banks.

 The positive reputation and public trust associated with posts are crucial to the 

success of postal financial services.

 It is essential to understand the various needs of different consumer segments, 

such as mass market customers versus the underbanked.

 87 Canadian Center for Policy Alternatives, Why Canada Needs Postal Banking, p. 10. 88 Decision/Analysis Partners analysis provided to USPS OIG.

International posts 

have used their 

ubiquitous networks 

and ability to reach 

many different types of 

consumers to succeed 

at financial services. 
RARC-WP-14-007 Providing Non-Bank Financial Services for the Underserved

U.S. Postal Service Office of Inspector General January 27, 2014

U.S. Postal Service Office of Inspector General

1735 N. Lynn Street

Arlington, VA 22209

Telephone: 703-248-2100

www.uspsoig.gov

For media inquiries, contact Agapi Doulaveris

Telephone: 703-248-2286

adoulaveris@uspsoig.gov