Postal Banking: A Financial Service Option Worth Exploring
Canada Post Corporation is spin doctoring its cuts to services such as door-to-door delivery and post office opening hours by making those reductions in service sound like a good business response to declining postal revenues. The language that Canada Post uses to describe its fiscal reality gives the impression that the end is nigh. For instance, an August 2013 Canada Post quarterly report concluded that “there is an urgent need to restructure the current business model” and “a need for additional liquidity in 2014.” Dire words indeed.
Given that the Crown corporation finds itself in financial distress, it seems rather shortsighted that Canada Post management has chosen to restructure its business model by withdrawing services, reducing staffing levels and raising prices, instead of looking for creative and innovative opportunities to attract more customers.
One revenue-generating idea that has been used successfully in many countries is the postal banking system. Postal banking has evolved since the days when workers would deposit the contents of their pay packets at their local Royal Mail outlet. In an October 2013 paper for the Canadian Centre for Policy Alternatives entitled “Why Canada Needs Postal Banking,” consultant and researcher John Anderson examines the history of postal banking and provides an analysis of its benefits. Anderson writes that many large and important postal banking institutions exist in internationally, including the Postal Savings Bank of China, the fifth-largest commercial bank in China with over 400 million customers. He examines five successful models—the United Kingdom, France, Italy, Switzerland and New Zealand—that have all maintained a relationship between the post office and financial services offered through postal outlets.
The study clearly shows that postal banking would succeed in Canada and help improve and stabilize Canada Post’s services and revenues. Many Canadians, especially those in rural and remote locations, lack physical access to banks or credit unions, and the number of bank and credit union branches has shrunk over the last 20 years. Anderson writes that “Because postal outlets are present in both rural communities and inner city neighbourhoods, new postal banking could offer to citizens and businesses in many communities banking services where they do not currently exist.”
Canada Post already provides some financial services such as postal money orders, money transfers and bill payments. It has a skilled and stable workforce and a total of almost 6,400 postal outlets (2012). New services would be tested regionally and could consist of savings accounts, low-interest credit cards, and even mortgages, insurance products and small business loans. All services, of course, would be profitable for Canada Post to provide.
Anderson goes on to discuss in more detail who should own the financial services, what mix of services should be offered and who should deliver them. He concludes with a recommendation that the federal government and Canada Post establish a task force to examine postal banking and determine priorities for delivering banking services. To date, the government has rejected the idea and Canada Post buried a management report that found postal banking would be a win-win strategy. “Banking: A Proven Diversification Strategy”examined profit margins at domestic banks and foreign post offices and drafted a “vision for Canada Post financial services.” Instead the corporation has opted for 35 percent rate hikes and the elimination of home mail delivery nationwide.
As a footnote, in yet another example of retrogressive policy, the Conservative government has announced its intention to introduce a “target benefit” pension plan for some public sector workers, including Canada Post personnel. The Canadian Union of Postal Workers is extremely concerned that the changes the government is proposing will weaken the union’s current “defined benefit” pension plan. According to the Financial Post, it appears that the federal public service plans themselves will not be touched, as the announcement specifically excluded core public sector workers. Apparently, a target benefit pension plan is a good vehicle for other employers but not for the federal government.
Alex Atamanenko, MP
BC Southern Interior