From xxxxxx <[email protected]>
Subject USPS Begins Postal Banking Pilot Program
Date October 12, 2021 12:00 AM
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[ The United States Postal Service (USPS) has taken the most
dramatic step in a half-century to re-establish a postal banking
system. The test allows customers to cash business or payroll checks
at the post office and place them onto a gift card.]
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USPS BEGINS POSTAL BANKING PILOT PROGRAM  
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David Dayen
October 4, 2021
The American Prospect
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_ The United States Postal Service (USPS) has taken the most dramatic
step in a half-century to re-establish a postal banking system. The
test allows customers to cash business or payroll checks at the post
office and place them onto a gift card. _

Photo Illustration by Jandos Rothstein // The American Prospect,

 

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
[[link removed]],
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.

“At first, [the postal worker] said she didn’t think she could
take the check,” Rothstein said. “But she read the check into her
scanner and it went through.” He didn’t need to show
identification or endorse the check. The post office charged Rothstein
a flat fee of $5.95, for any amount up to $500.

Several larger check-cashing chains charge a percentage rate
[[link removed]] that comes out to
$15 or more for a $500 check. Walmart charges between $4 and $8 for
check cashing.

A generic gift card, an existing product
[[link removed]] sold at post office
locations, can be used like a bank debit card, either to take money
out of an ATM (though that would, for now, incur fees), or pay for
goods and services either online or at point-of-sale retail locations.

Because the only innovation in the test pilot involves allowing gift
cards to be purchased with a business or payroll check, no additional
authority from Congress was required. Those who set up the product
expansion are confident that it falls within their legal mandate. 

Few would have named [Louis] DeJoy as the official who would set in
motion the most consequential executive action of President Biden’s
first term.

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 [[link removed]]).

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
[[link removed]],
extending to every ZIP code in the country. Adding revenue for a
Postal Service with shrinking mail volume is a secondary benefit.

“Offering new products and services that are affordable, convenient
and secure aligns with the Postal Service’s Delivering for America
10-year plan to achieve financial sustainability and service
excellence,” said USPS spokesperson Roy in a statement to
the _Prospect_. “This pilot, which is in collaboration with the
American Postal Workers Union (APWU), is an example of how the Postal
Service is leveraging its vast retail footprint and resources to
innovate.”

THAT COLLABORATION, and the USPS rolling out a key financial-inclusion
product that progressives have championed for years, is what makes the
announcement so staggering. Postmaster General Louis DeJoy has become
a high-profile villain to liberals since taking over last May,
condemned for almost immediately causing significant slowdowns of
mail, as well as ethical concerns surrounding the USPS awarding
contracts to the company he previously ran
[[link removed]].
DeJoy’s ten-year plan, rolled out this year, would cement this
dysfunction
[[link removed]] by
permanently slowing target delivery times
[[link removed]] and raising
prices
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some first-class mail, particularly around the holidays
[[link removed]].

The APWU has consistently criticized DeJoy. Last Thursday, union
president Mark Dimondstein criticized
[[link removed]] the
changes to service standards, saying: “The people deserve
the prompt, reliable and efficient mail service promised under the
law … We believe management’s response to months of poor
performance should be to improve service and regain the public’s
trust, instead of this focus on moving the goalposts and slowing
service standards.”

Few would have named DeJoy as the official who would set in motion the
most consequential executive action
[[link removed]] of
President Biden’s first term. And even fewer would have correctly
pegged that he would do it in cooperation with the APWU, one of his
biggest antagonists. But the union has been laser-focused on getting
postal leadership to embrace banking for many years, seeing it as an
attractive product to bring in customers and promote financial
inclusion.

In 2016, the APWU successfully negotiated postal banking pilots in
its USPS collective-bargaining agreement
[[link removed]].
However, previous postmaster general Megan Brennan ignored this
obligation and dragged her feet on the pilots. The APWU considered
filing a grievance, but ultimately decided that, even if it won a
pilot, postal leadership would not put in the energy and resources
necessary for the project to succeed.

Instead, when DeJoy took over, the union engaged him personally in a
series of meetings, pitching the postal banking idea again. In a sign
that DeJoy was interested, those meetings soon became weekly events,
involving technical staff.

“They listened, they didn’t shut us down,” said one APWU source
involved in the negotiations. “They have made the analysis that the
future of the USPS lies not in letters but in packages, and they see
the expansion of financial services as a companion to the package
market.”

One way the APWU got this across, union sources explained, was through
an anecdote about another country with a postal banking system,
Switzerland. If you order a pair of shoes online in Switzerland and
they don’t fit, you can take them back to the post office to return.
Not only will they ship the shoes back to the retailer, but they will
instantly credit your postal savings account. This fits with the USPS
mission of efficiently promoting commerce, and it creates a
competitive advantage over other shippers. The USPS leadership
obviously saw that as a selling point.

A good sign for the union that DeJoy had real interest in financial
services was when a division of the Postal Service attempted to cancel
the agency’s DineroSeguro international money transfer program. The
proposal got all the way to DeJoy’s desk, and he dismissed it.
“They held off, they thought that’s an area they can grow,” said
the APWU source.

As for how the APWU managed these delicate negotiations while also
fighting the USPS on service standards and mail rate changes, the two
sides managed to carry out their work on a parallel track, while
acknowledging they will have agreements and disagreements. “If they
are willing to advance something we like,” said the source,
“we’re not going to shut the door.”

THE UNION INITIALLY wanted the debit cards to be reloadable, but
ultimately for the test pilot it was decided that they would stick
with the single-use cards. The price point of $5.95 is also higher
than the original concept, though that could be tweaked later. And
while currently, just one location per region is offering check
cashing, APWU envisions every post office in an area being able to
offer the same financial services.

The pilot was always framed internally as a stepping stone to
something bigger, and if the current test is successful, other
features would likely be added.

Mehrsa Baradaran, a law professor at the University of California,
Irvine and a postal banking expert, said in an interview that the
effort was “incredibly safe legally … you have all the authority
you need.” She stressed the need for USPS to underprice Walmart on
check cashing; currently the price point is roughly a little more for
checks under $500. If that’s altered, she said, it could be a
successful product. “The post office has way more locations than
Walmart,” Baradaran noted.

Among the other options Baradaran thought would eventually be
necessary is some sort of security element, in case the gift cards are
lost or stolen. One way to do that would be by adding on a Venmo-like
arrangement, where balances and debits could be easily tracked and
transfers made from point to point. “It’s important down the road
to establish the proof of concept of an app,” Baradaran said. “Do
it well or don’t do it at all.”

Such a service would require a unique ID but no documentation,
allowing housing-insecure people to use the accounts. Additionally,
the gift card setup does not contemplate FDIC deposit insurance, but
the Postal Service does carry the full faith and credit of the U.S.
government. In fact, that security was part of the early advantages of
postal banking after its establishment in 1911, before the FDIC
existed.

Previously, President Biden’s most impactful executive action
involved increasing the minimum wage for federal contractors to $15 an
hour. (Thousands of contract workers at Maximus, a call center
operator for the Centers for Medicare and Medicaid Services,
just secured the new pay increase
[[link removed]] last
week.) But while that has a relatively limited reach, postal banking
could bring potentially millions of unbanked and underbanked people
into the financial system.

The _Prospect_’s Executive Action Tracker
[[link removed]], which
monitors 77 discrete actions that the president can take using their
own authority, now lists 13 that have been accomplished, with the
rollout of postal banking. Biden has been somewhat reluctant to use
his authority to go beyond reversing Trump actions, and there has been
a troubling lack of follow-through at some points, most notably with
his decision to agree to a patent waiver for COVID-19 vaccines at the
World Trade Organization. That process has stalled out, with the Biden
administration doing little to move it forward
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their announcement in April.

That’s what makes the postal banking pilot so unusual, and so
promising. A federal agency is creatively applying its power to
benefit the public in a tangible way. That it’s led by a top villain
of the Trump resistance is noteworthy, and there could be any number
of reasons for that. But motivations aside, what the USPS is doing on
financial services could spur the rest of the administration to follow
its lead.

_[David Dayen is the Prospect’s executive editor. His work has
appeared in The Intercept, The New Republic, HuffPost, The Washington
Post, the Los Angeles Times, and more. His most recent book is
‘Monopolized: Life in the Age of Corporate Power
[[link removed]].’]_

_Read the original article at Prospect.org
[[link removed]]._

_Used with the permission. © The American Prospect
[[link removed]], Prospect.org [[link removed]], 2021.
All rights reserved. _

_Click here [[link removed]] to support the
Prospect's brand of independent impact journalism._

_Support the American Prospect [[link removed]]
Click here to support the Prospect's brand of independent impact
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