New routes to financial access through postal alliances

How will financial services reach the underbanked and unbanked in the coming decade? The key is interoperability. Take, for example, the long-standing collaborations between financial institutions (FIs) and national post offices in 60 countries across Europe, Asia and Africa.

Most developed countries and many advancing countries around the world have some form of collaboration between financial institutions and postal centers. If there's one thing the world has long agreed on, it's the idea that everyone should be able to get mail. So operating out of post office infrastructures has proven to be a valuable gateway for expanding convenient, low-threshold access to financial services.

Postal center banking from the UK to Ghana

Countries around the world are mining the unrivaled potential of their postal systems to make financial services available to people in remote areas, financial deserts and even areas of conflict in an effort to expand access.

In the UK, the not-for-profit company Cash Access UK, owned and funded by nine major high street financial services providers, is providing cash, basic banking services and face-to-face support in communities across the country at Banking Hubs in community postal centers. The hubs are staffed by postal center employees along with a rotating roster of community bankers from the sponsoring FIs. As of June 2024, some 53 hubs had been opened, with another 132 in the works.

The UK Post Office has also recently partnered with the mobile banking app Monzo to provide the physical access point digital banks are lacking by offering cash deposit services for Monzo customers at all its branches. Ross Borkett, banking director at the Post Office, said cash deposits and withdrawals at postal centers are now at their highest-ever levels.  

In Africa, cash-in and cash-out services for deposit accounts and loans are available at postal centers across Benin and Ghana with the support of banks and micro-finance institutions. Postal centers in Morocco offer expanded financial services like insurance and in Tunisia, mobile payments. Some postal centers collect and process utility bills and government payments. 

Around 60% of Latin Americans don't have a bank within reach, but with some 37,000 postal centers on the continent, most people can get to one of them. 

In Ukraine, the role of Ukrposhta, the country's national postal service, has been broadened during the war with Russia to provide a place for Ukrainians to receive pension payments and medicine, and to run online businesses while many domestic jobs are disrupted.

Some countries are considering converting their postal centers to full-fledged branches of financial institutions. For example, The Indian Finance Ministry says the post office lacks the experience and expertise to handle sophisticated functions like credit and managing risk and is exploring partnering with India Post Payments Bank with the objective of increasing flexibility and giving a more modernized look to the post offices. Post offices in Brazil and Indonesia have partnered with financial institutions to offer deposit accounts and credit products.

The US previously had something similar to postal center banking, but doesn't anymore, though there are continuing efforts to bring it back. Its Postal Savings System was established in 1910 to offer savings accounts at designated postal centers, but the program was discontinued in 1967. Now, the Roosevelt Institute, The American Postal Workers Union and other organizations and government officials are advocating for a modern-day version of the program. The APWU says this is both a way to provide needed services to the unbanked and to increase revenue for The US Postal Service.

Benefits of postal center collaborations for financial institutions

Not only do public postal center hubs provide essential benefits for society, they also offer valuable opportunities for FIs, including:

• New revenue streams from business model diversification, including:
  - White label partnerships for deposit accounts, loans and payment processing under the postal service's brand
  - Standalone technical support service offerings
  - Debt financing opportunities to help public hubs raise capital

• Expanded access for customers beyond the FI's existing footprint

• Enhanced reputation as a socially responsible and community-focused organization

• Competitive advantages in leveling the playing field with other FIs in selected markets

• Risk management in economic downturns and financial crises

• Compliance with governmental financial inclusion mandates (depending on the country)

By leveraging these existing nationwide infrastructures, FIs can contribute to financial inclusion while expanding their own reach and growth opportunities.

Public link

Please use the above public link if you want to share this noodl on another website.