The U.S. Postal Service (USPS) has considerable financial expertise … in losing significant sums of money. America’s mail carrier has lost more than $90 billion over the past 15 years, including a $4.9 billion net loss in fiscal year (FY) 2021.
Undeterred by these dismal numbers, the USPS has been piloting financial services to sell alongside stamps and boxes. And these efforts have gone as well as one might expect. On Jan. 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 move into postal banking and focus on delivering for the American people.
From the start, it was unclear exactly what the USPS was hoping to accomplish with its check cashing experiment. Scarcely advertised and launched in only four post offices, the program was widely seen as the first step to provide 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, zero required deposits, and easy check cashing capabilities.
According to the Cities for Financial Empowerment Fund, there are now more than 100 bank and credit union accounts that meet the low-fee national standards developed by the organization. Data from the Federal Deposit Insurance Corporation show that the share of households without a bank account has declined by about 20% from 2015 to 2019, and the 5.4% of unbanked households have a variety of reasons for forgoing 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But most of the underbanked minority do not cite bank fees or minimum balance requirements as the main reason for avoiding banks. It therefore seems unlikely that the USPS setting up a low-cost check cashing service would solve any pressing problem in the marketplace. And even if it could, the USPS’ check cashing fee of $5.95 is far too high to compete with banks’ low-cost offers. The agency’s pilot price even surpasses Walmart’s fees, which amount to about $4 for checks up to $1,000.
Some would be tempted to say that the USPS offered prices were simply too high, and the agency could find the “right” price that would allow them to compete with the private sector while covering 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 wacky (and still mostly classified) cost attribution formula. And the agency has a real problem getting a lid on “controllable” costs such as equipment and fuel expenses. The costs and risks of services such as check cashing can be particularly high, given the alarming (and increasing) volume of check fraud. The amount of money involved in check scams nearly doubled from 2016 to 2018, and this type of fraud “makes up 60 percent of all attempted fraud against U.S. bank deposit accounts, according to a survey released by the American Bankers Association.” The idea that the USPS is somehow uniquely positioned to get a grip on this problem in a cost-effective way is simply wishful thinking.
The data is clear that the USPS is in over its head and should ditch the check cashing business. The agency should focus on how to effectively deliver mail while addressing the cost drivers and network overbuild that make these deliveries far too expensive. It’s time for a leaner Postal Service that focuses on its core mission.
By: Ross Marchand, a senior fellow for the Taxpayers Protection Alliance.