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Postal banking may soon be here! But there’s a catch

The USPS has discussed letting JPMorgan Chase put ATMs in post offices.

Postal banking may soon be here! But there’s a catch
[Source Image: thenatchdl/iStock]

For many years now, progressive politicians have been recommending the return of postal banking, whereby post offices would provide basic banking services in their branches around the country. Senator Kirsten Gillibrand proposed the Postal Banking Act in 2018, and has reignited her push this year in light of Trump’s attacks on the service. Senator Bernie Sanders has also been championing it since at least 2014.

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On Wednesday, The Capitol Forum first reported that a postal banking pilot may soon be underway—but with a twist that would alarm most progressive advocates of the concept. The USPS has talked to JPMorgan Chase about a proposal for the bank to put ATMs and other banking services in some post offices. That original report, based on an internal USPS document, indicated that it would take the form of a “limited pilot program” in “several states.”

JPMorgan Chase confirmed the discussions to Fast Company in an email. “We had very preliminary conversations with the U.S. Postal Service several months ago about what it might look like to lease a small number of spaces to place ATMs to better serve some historically underserved communities,” said Trish Wexler, chief communications officer for Chase’s consumer and community banking. “These were very preliminary conversations—there is no agreement in place and no imminent plans to move forward.”

Supporters of a broad postal banking program argue that the system would give the quarter of American households that are unbanked or underbanked access to banking services. There are more than 31,000 post offices in the U.S., and 59% of them are in zip codes that have no banks at all. The post office already provides limited financial services including money orders, electronic funds transfers and U.S. Treasury check cashing, but Gillibrand’s proposal would add government-run checking and savings accounts, ATMs, mobile banking, and low-interest loans, all of which would help those lower-income households from having to use “costly, fringe financial products” for their transactions. (Gillibrand’s office did not reply when asked about the JPMorgan Chase proposal.)

Postal banking is not new. Between 1911 and 1966, the post office provided banking for four million Americans. In other developed countries, where it’s common practice, it also generates substantial revenue for postal services. A 2014 report by the USPS Inspector General noted that it could produce $8.9 billion of revenue per year. That’s especially important now, when there’s panic over the need to infuse billions of dollars into the Post Office, especially as a mail-centered election approaches.

It’s likely that financial instability is the reason that the USPS is considering a private partnership, which would create a profit at no cost or risk to the service, says Mehrsa Baradaran, a law professor at the University of California, and a longtime proponent of postal banking, which she proposed in her 2015 book, How the Other Half Banks.

The USPS wouldn’t directly address the JPMorgan Chase pilot. “The Postal Service’s mission is to provide the American public with trusted, affordable, universal mail service,” said spokesman David Partenheimer in an emailed statement. “Our core function is delivery, not banking. To the extent our research concludes that we can legally provide additional services at a profit and without distracting from our core business, we would consider these.”

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Baradaran does say a banking pilot, even if via a private company, could increase access for some communities. But: “I think those benefits are outweighed by the potential antitrust issues,” she says, stressing the danger of market power in this space. “J.P. Morgan, and the other steel and railroad magnates, are the reason the U.S. has antitrust laws in the first place.”

For Baradaran, having a private middleman defeats the entire purpose of postal banking, which is a public bank competing against banks like JPMorgan Chase. Inserting a private company into the postal space may be a sign of its unease of that public option. In June this year, an alliance of bank lobbying groups that represents the biggest banks sent a letter to Nancy Pelosi urging her to not consider postal banking bills, citing regulatory and consumer protection concerns. “We encourage Congress to enact legislation that would reduce costs and increase efficiencies to put the U.S. Postal Service on a sound and sustainable financial path over the long run,” the letter read, “but the provision of banking services is not an acceptable solution.”

Baradaran warns that despite its claim that it wants to help underserved communities, JPMorgan Chase is a business that makes decisions based on profits. “Banks are profit-oriented institutions, and a lot of these small accounts to rural or LMI (low-and-moderate income) regions have slim profit margins,” she says. “Banks have to make the juice worth the squeeze. And, usually, it’s LMI consumers that are squeezed.”

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