Banking on those who don't [Commentary]

If you are among America's 68 million people who can't, won't or just don't do business with private banks, the post office wants you.

Recognizing a need for affordable banking services among the nation's lower-income consumers, the U.S. Postal Service also sees a way to bolster its own bottom line by offering financial services.

We'll get back to the post office in a minute. But first, who are these consumers who require a new model of financial services? The first, the so-called unbanked, are those who prefer to deal in cash and who don't use traditional, regulated banks for a myriad of reasons, including an inability or unwillingness to pay high fees or a poor credit history that precludes access to loans. To conduct financial transactions, they rely on nonregulated, alternative financial services such as check-cashing outlets, payday lenders and pawnshops. Meanwhile, "underbanked" consumers might have a checking or savings account, but they also rely heavily on alternative providers — and pay the steep price.

Thanks to banking deregulation and to the recent economic crisis, banks exited low-income areas in droves, leaving them virtual deserts for traditional financial services and an easy mark for alternative providers.

Consumers stuck using alternative banking services pay, on average, $2,500 a year. They also have few options to establish savings accounts or to obtain low-dollar-amount loans — two factors crucial to establishing financial stability.

To traditional banks, the unbanked and underbanked demographic represents low profits and high risk. To alternative financial services providers, however, the same demographic represents approximately $78 billion annually in revenues.

This is where the post office comes in.

According to a recent report by the agency's inspector general, the independent — and broke —government body could make $9 billion a year by offering banking services that would be less expensive than those offered by the alternative market. The financial products proposed are straightforward: a check-cashing card for online transactions, a savings account and even small loans.

Post office banking could be a boon to low-income communities and a means to help alleviate poverty. It could even lead to a more just society.

The World Bank, in a study of developing nations, links a lack of financial inclusiveness to pronounced income inequality, which itself results in a crushing of economic opportunities for lower-income people — and in the perpetuation of poverty. That conclusion is no less true in America.

It is undeniable that cash transactions — those made frequently by lower-income consumers — cut into banks' profits; banks make more from people who leave funds on deposit or in savings accounts. Yet because payment transactions are a fundamental underpinning of a market economy like ours, the lack of access to affordable transaction services by a sector of society raises the issue of what financial inclusion really means in a democracy.

To be financially inclusive, societies need a financial infrastructure that provides solid, affordable financial services to all consumers. They also need a financially literate consumer base.

The U.S. Postal Service's proposal has history on its side. Until 1967, the post office offered basic banking services to Americans. Today, Germany and Taiwan have strong competitive public banking sectors that generate revenue and enhance economic development alongside strong private banking sectors.

Access to affordable, high-quality financial services — that's what all Americans need. If the U.S. Postal Service can provide that, bring it on.

Cassandra Jones Havard is a professor at the University of Baltimore School of Law, where she teaches corporate and commercial law, including the law of financial institutions. She also hosts the website Banking4All. Her email is

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