The United States Postal Service (USPS) has considerable financial expertise…to lose large sums. The US mail carrier has lost more than $90 billion over the past 15 years, including a Net loss of $4.9 billion during fiscal year 2021.
Undeterred by these dismal numbers, the USPS piloted financial services to sell alongside stamps and boxes. And those efforts went as well as one might have expected. On January 14, Government Executive Senior Correspondent Eric Katz reported that a USPS pilot to provide check cashing services at $5.95 per transaction resulted in just six sales totaling $35.70 for the agency. It’s time for the agency to end these lackluster attempts to switch to postal banking and focus on delivering for the American people.
From the start, it was unclear exactly what the USPS hoped to accomplish with its check cashing experiment. Barely announced and launched in just four post offices, the program was widely seen as the first step in providing financial services to Americans at a lower cost than can be obtained in the private sector.
But this strategy makes little sense because banks regularly offer accounts with low/minimal fees, no deposit required, and easy check cashing capabilities.
According to the Cities for Financial Empowerment Fund, there are now more than 100 banks and credit unions accounts that meet low-cost national standards developed by the organization. Federal Deposit Insurance Corporation data Pin up that the share of households without a bank account decreased by around 20% between 2015 and 2019, and that the 5.4% of unbanked households have various reasons for giving up a bank account.
But most of the underbanked minority do not cite bank fees or minimum balance requirements as the main reason for avoiding banks. So it seems unlikely that the USPS implementing a low-cost check cashing service will solve a pressing problem in the market. And even if it were possible, the USPS check cashing fee of $5.95 is far too high to compete with banks’ low-cost offerings. The agency’s pilot price even exceeds Walmart’s fee, which is about $4 for checks up to $1,000.
Some would be tempted to say that the prices offered by the USPS were simply too high, and the agency could find the “right” price that would allow them to compete with the private sector while covering the expenses. But the USPS hardly has the best track record with sound financial decision-making.
Indications abound that the agency has been underpricing packages for years via a goofy (and still mostly ranked) cost attribution formula. And the agency has a real problem getting control of “controllable” costs like equipment and fuel expenses. The costs and risks of services such as check cashing can be particularly high, given the alarming (and growing) volume of check fraud. The amount of money involved in check scams nearly doubled from 2016 to 2018, and this type of fraud “accounts for 60% of all fraud attempts against U.S. bank deposit accounts, according to a survey published by the American Bankers Association”. The idea that the USPS is somehow in a unique position to bring this problem under control in a cost-effective manner is simply wishful thinking.
The data clearly indicates that the USPS is in over its head and should exit the check cashing business. The agency should focus on how to deliver mail efficiently while tackling the cost factors and network overload that make such deliveries far too expensive. It’s time for a lean postal service that focuses on its core mission.
Ross Marchand is a senior researcher at the Taxpayers Protection Alliance.