Payments and the Postal Service

The Inspector General of the United States Postal Service recently released a paper [PDF] suggesting that the USPS should get into banking, like post office in many other countries.  In 2008 (2007?), the team at Green Dot (including myself) responded to an RFP from the USPS on this very topic and were told the Postal Commission said, “no.”

There’s an excellent write-up in the opinion section of the New York Times on the positions around the USPS providing financial services. Personally, I think it is a no-brainer that at least some basic options should be provided to help serve the entire US population, including the underserved.

I remember pitching the USPS very well, because it was the largest government proposal I had worked on. An RFI was announced in mid-summer and we only had about 30 days to respond.  I recall many long hours writing up how the USPS could take advantages of the technologies and support provided by prepaid reloadable debit cards to effectively providing basic checking services to the underbanked, while maintaining a retail interaction with their customers.

Following the RFI, we were asked for a real RFP with projections and more.  We flew to DC in December, where I recall GDOT’s secret weapon was a completely-built free-standing display showing how these prepaid cards could be merchandised.  I had comp photos of it after getting permission from Washington DC to take photos in the Monrovia Post Office, but here was the real thing. I had to put it together in my hotel room by myself out of a very big box. I remember standing on the bed at like 1am making sure I could package it back up so we could wheel it secretly across the plaza for our 9am meeting in the freezing, freezing cold.

We felt really strong about what we were offering.  We knew that GDOT was (is?) the best at selling basic banking to the underbanked in a retail setting.  We were crushed (or at least I was) when after a couple of weeks the USPS responded that no one was selected as the Postal Commission decided it shouldn’t compete with other financial institutions.

The crux of that issue is to determine what that level of competition is.  Major banks are NOT serving the needs of the unbanked–that’s why we call them underserved.  Check cashers are doubtfully to be called “financial institutions” due to their usurious interest rates and scary locations.

While I don’t know yet my position on the USPS providing loans, there is no doubt in my mind that a natural progressions from their money order business is to have a full checking account alternative in the form of a reloadable prepaid card.  This can be issued by a consumer-friendly third-party bank (not a big five bank) and can be easy to use, mobile-focussed and generate great revenue for the USPS.  The USPS can cash checks directly on to cards at low cost with check cashing terminals and bring critical banking services to millions in underserved rural and poor urban communities.

I encourage you to write to your Senator or Congressman in support of the USPS finding a way to both serve Americans better and stay in business.  Both goals are good for all of us.