If you live in four locations on the East Coast, you can now use the Postal Service to cash business and payroll checks and have the funds returned as a gift card.
The United States Postal Service rolled out the test program last month in Baltimore, Washington, D.C., Falls Church, Virginia, and the Bronx, New York. Customers in those locations can now bring in their business or payroll checks (up to $500) and have the money deposited onto a disposable gift card.
A spokesperson for the USPS confirmed to the Washington Examiner that the program began at the four retail locations on Sept. 13 and that funds will only be disbursed in the form of gift cards and not cash.
“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,” the Postal Service said in a statement.
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The U.S. already had a postal banking system in place, known as the Postal Savings System, from 1911 until it was dissolved by Congress in 1966. Some liberal lawmakers have pushed to return some financial services to the USPS.
Democratic Sen. Kirsten Gillibrand of New York announced legislation in 2018 that would establish a retail bank in all the Postal Service’s 31,000 locations. Her goal was to end “predatory payday lending industry practices” by giving low-income people access to basic banking services.
The notion has also been championed by Sen. Elizabeth Warren, who promoted it during her unsuccessful 2020 bid for president. The Massachusetts Democrat wanted the USPS to partner with community banks and credit unions to offer basic, low-cost banking services such as checking and savings accounts.
They, along with some other left-leaning lawmakers, have highlighted the idea of “bank deserts” where people don’t have a bank or credit union in their immediate vicinity. Proponents of the USPS offering financial services say that it would allow banking access to underserved and low-income people.
Gillibrand told the Washington Examiner on Monday that the pilot program is a “great first step” toward establishing a postal bank.
“While the products it will offer are not as expansive as those contained in my legislation, the Postal Banking Act, a pilot program will demonstrate the value to these communities, and show that the USPS can effectively service underbanked urban and rural communities,” she said in a statement.
Gillibrand called postal banking an “elegant solution” to the complex problem of those who are unbanked or underbanked and would generate an estimated $9 billion in revenue for the Postal Service.
The USPS spokesperson said that the test program aligns with the Postal Service’s 10-year plan, which was announced earlier this year and designed to ease financial losses. A major part of the plan was paring back delivery time expectations and increasing prices.
Target delivery times for first-class mail and periodicals are being slowed by about 30% beginning last Friday.
“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,” the USPS said of the postal banking pilot.
Banks are likely to oppose the pilot program, as it puts them in direct competition. Interest groups such as the American Bankers Association and Independent Community Bankers of America have pushed back on lawmakers who have advocated for postal banking.
In a July 2020 letter to House leadership urging them to reject postal banking legislation, several banking groups said that the USPS providing banking services would raise “a number of serious regulatory and consumer protection questions.”
“Congress should encourage the Postal Service to focus on its core business of physical mail delivery, and not attempt to expand the mission to businesses outside of the Postal Service’s area of expertise,” they wrote. “Postal banking does not address the Postal Service’s core financial challenges, and may well make them worse.”
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The establishment of postal banking beyond the pilot program rolled out last month would require Congress to pass legislation, as the USPS cannot implement banking services across its thousands of offices without lawmakers’ stamp of approval.
