A Stopped Clock Moment

Louis DeJoy, the worst postmaster general in history,™ has begun a test of reintroducing postal banking at selected post offices.

While the man is an unmitigated disaster, he's right on this one:

The United States Postal Service (USPS) has taken the most dramatic step in a half-century to re-establish a postal banking system in America. In four pilot cities, customers can now cash payroll or business checks of up to $500 at post office locations, and have the money put onto a single-use gift card. It’s the most far-reaching executive action that the Biden administration has taken since Inauguration Day.

The move puts the USPS in direct competition with the multibillion-dollar check-cashing industry, which operates storefronts to allow unbanked or underbanked residents to cash their paychecks.

According to USPS spokesperson Tatiana Roy, the pilot launched on September 13 in four locations: Washington, D.C.; Falls Church, Virginia; Baltimore; and the Bronx, New York. To test the system, Prospect art director Jandos Rothstein visited a post office in Falls Church on Saturday and successfully cashed a business check onto a Visa gift card.

………

The test pilot is extremely limited—only one post office location in each pilot city is participating—but officials have floated ideas for how it could expand. The card could be reloadable rather than single-use, used to store multiple paychecks over time. USPS could keep track of the card value, accounting for a user’s balance in case it gets lost or stolen. Postal gift cards, currently branded for businesses like Barnes & Noble or Olive Garden as well as the generic Visa card, could be branded as coming specifically from USPS, with no-fee branded ATMs inside post office buildings. And other possibilities have been discussed, like bundling gift cards with a postal money order to pay bills, or making domestic money transfers from one post office to another (the USPS already offers international money transfers to nine Latin American countries, a program called DineroSeguro).

In other words, a few simple expansions would effectively make this product a postal bank account, the first since the original postal banking system shut down in 1967 after 56 years in operation. At its height, four million Americans had bank accounts at the post office.

A modern postal banking system could underprice non-bank financial products and give people with little or no access to financial services the ability to use the USPS network of 31,000 facilities, extending to every ZIP code in the country. Adding revenue for a Postal Service with shrinking mail volume is a secondary benefit.

This is an excellent idea.

Not only could it provide revenue to the USPS and serve as an incentive to keep post offices open, but it would provide a meaningful alternative to the usurious check cashing operations that proliferate in poorer neighborhoods.