Postal banking gains momentum
With Democrats in control of Congress and the White House, the concept of postal banking appears to be gaining traction.
Sen. Sherrod Brown, D-Ohio, a long-time proponent of postal banking, is leading the Senate Banking Committee. Top Democratic leaders are calling for a postal banking pilot program and have previously introduced bills to establish postal banking. Sen. Kirsten Gillibrand, D-N.Y., and others suggested Congress include $6 million in its appropriations bill to pilot a nonprofit banking operation run out of postal offices.
Postal banking advocates argue that leveraging the U.S. Postal Service's more than 34,000 locations to offer low-cost, basic banking services like checking accounts and low-interest loans is the best way to reach low income and underbanked consumers. It's a form of public banking that has been successful in several countries, including Japan, Germany, France and China. But opponents of postal banking believe it would create an unfair competitive environment for community banks, pitting them against a government entity with a virtually unlimited budget.
Some critics dismiss the need for postal banking, arguing the banking business is best left to the private sector.
"We have banks. The idea that the government is going to do a better job is just laughable," said Patrick Toomey, R-Pa., Senate Finance Committee ranking member.
With a razor-thin margin in the Senate, Democrats in favor of postal banking are facing an uphill battle, noted Isaac Boltansky, director of policy research at Compass Point Research & Trading LLC. "The odds are still heavily against postal banking being enacted any time in the near future."
The primary goal of a postal bank would be to serve unbanked and underbanked Americans. An FDIC survey in 2019 found that 5.4% of Americans were unbanked. Even more people are underbanked, meaning they have some access to financial services but still used high-cost products such as small-dollar loans from payday lenders.
Source: S&P Global Market Intelligence