It's Time for a Postal Bank for Everyone - How a bank in the Post Office could help you

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Thursday June 14 2018
Postal workers' unions — the Canadian Union of Postal Workers (CUPW) and the Canadian Postmasters and Assistants Association (CPAA) and more than 600 municipalities(1) and other allies are supporting the set-up of postal banking and making financial services available in every post office. This report recaps the case for postal banking, and shows how clear the path is for its implementation in Canada.

It's Time for a Postal Bank for Everyone -  How a bank in the Post Office  could help you

It's Time for a Postal Bank for Everyone -  How a bank in the Post Office  could help you

 

A research report prepared by John Anderson for the Canadian Union of Postal Workers, 2018

 

How a bank in the Post Office could help you

Postal workers' unions — the Canadian Union of Postal Workers (CUPW) and the Canadian Postmasters and Assistants Association (CPAA) and more than 600 municipalities 1 and other allies are supporting the set-up of postal banking and making financial services available in every post office. This report recaps the case for postal banking, and shows how clear the path is for its implementation in Canada.

 

A. Why do we need it?

  1. Many Canadians no longer have access to a bank or credit union.
  2. Do you no longer have a bank branch or credit union in your neighbourhood or community? Well, it is not just missing in your community. In fact, the total number of bank and credit union branches has declined massively. Today, there are 6,190 bank branches in Canada, down from 7,964 in 1990, and there are 2,831 credit union branches in 2017 compared to 3,603 in 2002. And closures are still going on today. 2

    Many communities now have no banks or credit unions at all. A study showed in 2014 that 45 percent of small towns and rural communities with a post office did not have any bank or credit union. British Columbia and Nova Scotia had rates above 60 percent, and Newfoundland above 80 percent!

     

    Table 1: Rural Post Offices Surveyed on Financial Services & Franchises 2014

    Provinces and territories

    Total

    No bank or credit union

    % Communities with no bank or credit union

    British Columbia

      176

         107

    61%

    Alberta

      211

         60

    28%

    Saskatchewan

      322

       144

    45%

    Manitoba

      177

        85

    48%

    New Brunswick

      111

        55

    50%

    Nova Scotia

      157

      102

    65%

    Newfoundland and Labrador

      255

     215

    84%

    Prince Edward Island

        27

       16

    59%

    Ontario

      457

     202

    44%

    Quebec

      718

     189

    26%

    Nunavut

          3

         1

    33%

    Yukon

          6

         2

    33%

    Canada

    2620

    1178

    45%

    Source: John Anderson, "Why Post Offices need to offer banking services", Canadian Postmasters and Assistants Association, September 2014 http://cpaa-acmpa.ca/pub/files/banking_services_SEPT23Eng.pdf

     

    But, it is not only in small town and rural Canada that this is happening. Many neighbourhoods in large and medium-sized cities now have no bank or credit union branch or now have fewer branches. In Ottawa, central downtown Bank Street (as the name implies, once home to major branches of all the major banks), now has more payday loan locations than bank branches. 3

     

  3. Existing banking services are very expensive for most people and a postal bank could offer very affordable services while still making a profit.
  4.  

    The big six Canadian banks are among the most profitable banks in the world.  They collectively earned $42 billion in profit in 2017, a 13 percent increase over 2016 and double the profits that the banks made in 2010. 4 Their total profits are more than twice the total of all annual deficits for 2016 of our federal, provincial and municipal governments combined, which according to Statcan was $18 billion! 5

    The average monthly fee levied on chequing account plans rose by 13.6 percent from 2005 to February 2013. 6 Fees for chequing accounts with unlimited transactions range around $16-30 per month at the major banks. 7 This means many people are paying $360 a year for basic banking services! Cheaper plans are available but charge extra for many services or for using basic services multiple times.

     

  5. Most Indigenous communities do not have a bank or credit union.

    While there are over 700 Indigenous communities in Canada, there are only about 66 bank or credit union branches in these communities. That means less than 10 percent of Indigenous communities have a bank or credit union branch. A Canada Post bank could work with Indigenous communities to offer banking services in their communities.

  6.  

    Table 2: Indigenous Communities Bank or Credit Union Branches

    RBC 8

    11

    RBC branches in territories NWT,YT,NU

    6

    First Nations Bank 9   

    12

    CIBC 10    

    6

    TD 11       

    5

    Scotiabank 12   

    4
    + 28 Aboriginal Banking Centres
    in major municipalities

    BMO 13       

    14

    Total Banks                                                   

    58

    Credit Unions 14  

    8

    Total

    66

    Figures are from the September 2017 websites of the major banks and credit unions.

     

  7. Most people still need to use a branch
  8.  

    But does anybody still use branches? Don't we do it all online? One argument used against starting a postal bank is that nobody uses a bank branch anymore. But the reality is that people still need bank branches. A study from the Canadian Credit Union Association showed that over 50 percent of Canadians still use a bank or credit union branch on a regular basis.

     

    Table 3: Use of Branch (not ATM) Channel by Financial Institution

     

    2015

    2011

     

    C.U. Members

    Bank Customers

    C.U. Difference

    C.U. Members

    Bank Customers

    C.U. Difference

    Never

       10%

      9.8%

    0.2%

      8.3%

    10.1%

    -1.8%

    Over 6 months ago

    20.7%

    23.5%

    -2.8%

    18.7%

    23.7%

    -5.0%

    Past 6 months users

    69.3%

    66.7%

      2.6%

       73%

    66.2%

      6.8%

    Within the last 3 to 6 months

    14.2%

    16.7%

    -2.5%

    16.6%

    18.5%

    -1.9%

    Less than 3 months ago

    55.1%

    50.1%

      5.0%

    56.4%

    47.7%

      8.7%

    From Canadian Credit Union Association, System Brief, December 2015, https://www.ccua.com/publications/system_briefs

     

  9. We need an alternative to pay day loans. Payday loan rates are usurious. At the lowest rate in Canada – which is now in Ontario – a $100 loan at $15 interest over two weeks still amounts to an annual interest rate of 391 percent! Yet pay day loans are only accorded to people who have a reliable income source. Thus, a new postal bank could offer alternative products to pay day loans at similar rates to credit cards, which at their most expensive are under 30 percent. For example, a 29 percent rate would cost about $1.11 over two weeks instead of $15.
  10.  

  11. Banking services help support other post office services such as mail service, home delivery, and local post offices. Mail delivery is itself an important service in a large country like Canada where the cost of mailing a letter 9,300 kilometers (the width of Canada) is the same as mailing one to a recipient in the same town. Also, home delivery which has been cut needs to be re-expanded and this requires revenues from multiple sources. Postal banking revenues have proven to be valuable in many countries, as the following chart shows.
  12.  

    Table 4: 5 Major Successful Postal Banks

    Country

    Service

    Number of customers

    No. of employees

    Profits of postal financial services

    Sales

    Profits of group

    Fin/services
    % of total profits/sales

    United Kingdom

    Post Office Money 15

     

    80-100 at HQ

     

    £301 million out of £940 million

    UK PO does not publish profits by sector

     32%

    New Zealand

    Kiwi-bank 16

    800,000

    1,000

    $122 million NZ before write down of IT and then $58 million

     

    $27 million NZ 17

      214%

    France

    Banque Postale 18

    10.7
    million

    2,541

    538 million € before tax 477 million € after tax

     

    975 million € (before tax) 19

     55%

    Swit-
    zerland

    Post-Finance 20

    3 million

    3,599

    542 million CHF 21

     

    558 million CHF 22

     97%

    Italy

    Banco-Posta 23

    9.55
    million users
    5.8 m depositors 24

    1,824

    813 million €

     

    622 m. €

       144%

    Sources: All figures are from the 2016 annual reports of the Post Office Groups and Postal Banks

 

B. How would it work?

Postal banking can be run in many different ways. The simplest one would be as a subsidiary of Canada Post. It could be set up in one major region of the country at a time. The easiest way to set it up would be as a Crown Corporation in the same manner as the other federally-owned banks. (see below)

 

C. What services would be offered?

First, basic banking services such as savings and chequing accounts and bill payment. It could then build to other services such as mortgages, business and personal loans, foreign exchange, investments, insurance and alternatives to payday loans.

 

D. What do the Post Office and the federal government know about banking?

Some ask, "What do Canada Post and the Federal Government know about banking and financial services?" But the answer may surprise you:

  1. Financial services at Canada Post – past and present
  2.  

    • Canada Post has had 100 years of banking experience. Postal banking in Canada was introduced in 1868 right after Confederation and lasted until 1968. The legislation that enabled postal banking is still on the books.
    •  

    • Canada Post already delivers some financial services at its 6,200 plus offices, the largest retail chain in Canada. It sells money orders, credit cards and has an on-line bill delivery service, epost, which could easily be modified to allow bill payment on-line. Canada Post already has a secure delivery system in place, which can be further developed. Canada Post already has trained staff who can learn how to deliver new financial functions to support banking services.

     

  3. Four profitable and successful federal banks already
  4.  

    The federal government already administers four very successful banks, all of which made profits totaling $3.2 billion in 2016. These banks could provide support for the new postal bank as they already have 242 offices across the country, provide loans to farm families and businesses as well as offer savings products such as Treasury Bills, and until recently, Canada Savings Bonds. Staff expertise from over 7000 public servants could be seconded to the new postal bank.

 

Table 5: Federally owned banks in Canada

Name

Assets

Number of Customers

Profits

Number of Offices

Headquarters

Employees

Services

Farm Credit Canada 25

$33 billion

100,000

$613 million

100

Regina

1800

Loans, mortgages

Business Development Bank of Canada 26

$25.3 billion

49,000

$464 million

118

Montreal

2200

Loans

Export Development Bank 27

$63 billion

7150

$1072 million

18 Canada
19 International

Ottawa

1400

Loans

Bank of Canada 28

$106.1 billion

 

$1057.6 million

6 Canada
1 International

Ottawa

1700

Treasury Bills

Total

$227.4 billion

156,150

$3207 million

242 Canada
20 International

 

7100

 

Source: Table figures from Annual Reports 2016

 

E. Who would pay for it?

While a new postal bank would require initial investments from the federal government, Canada Post already has the bricks and mortar offices as well as the staff – who would need training on new financial products, but already deals with financial products and retail sales. The profitability of postal banks worldwide shows that any new investments in equipment and training would be quickly repaid.

 

F. How would it benefit me?

 If you use the new services, you would have access to services for all your banking needs in your neighbourhood or community – where many have either had no bank or credit union, or perhaps only one other banking service to choose from. Postal delivery workers could also be equipped with a tablet to help with some of your banking needs if you were unable to leave your home or could not use online services.    

If you do not use the services, you would still benefit because postal banking would support the economic development of your community and your country, especially helping local citizens get fair rates and helping local businesses access services they need. Also, postal banking would help guarantee the postal services we have now and even help expand them.

 

G. Who would use the services?

Research carried out for the Government of Canada's Postal Service Review Task Force in 2016 29 showed that, even without having all the details or being able to see how exactly the postal financial services would work, a large number of Canadians wanted to use them. Eleven percent of Canadians say that they would definitely use some financial services at Canada Post. There are 29.65 million Canadians over 18, meaning that 3.26 million Canadians would immediately be interested in the new banking services. 30 The 7 percent of Canadians who said a definite yes to using full banking services at the post office, plus the 22 percent who said they would probably use them, means some 2.075 million Canadians could soon have accounts at the postal bank, with another 6.5 million Canadians as probable users.

Since 47 percent of Canadians said new banking products were a good or excellent fit for Canada Post, the future for increasing the above numbers looks excellent. The 27 percent Indigenous support for adding banking services was also very encouraging. Finally, the 39 percent of business support and 11 percent of businesses committed to using postal banking services would make a Canada Post Bank one of the top business banks in Canada. There are 1.17 million businesses 31 (small medium and large) so an 11 percent of businesses using the services would mean 128,700 businesses ready to use postal banking services.

 

H. Postal banking could become the anchor of many other additional community hub services offered in the post office location.

In Delivering Community Power, http://www.deliveringcommunitypower.ca/, we saw how the post office could become the new hub of community services. As well as traditional post office services and financial services, the local post office could offer such services as:

  1. Other federal, provincial and municipal services such as passports, tax payment, drivers' licenses and car plates;
  2. Charging stations to recharge your electric vehicle, assuring that there is a charging station offering fair prices in every neighbourhood;
  3. Internet services at cheaper rates as well as places to use computers: Many communities still have no high-speed internet, which the Post Office provides in many other countries; 32
  4. Centre for checking on seniors and people with disabilities: Postal delivery workers are in regular contact with many of our citizens. By building on this role and checking in on our most vulnerable residents, postal delivery workers could help build more healthy and secure communities;
  5. Drop off and pick up points for fresh healthy food. Most people would like to eat healthy food but for many it is difficult to obtain in their community. The post office could serve as a regular weekly drop off point for fresh food baskets at reasonable prices. 

 

Because of the number of people who want to use banking services, and because of the revenues that can be made even while offering better and less expensive financial services, the postal bank can become the anchor for these other roles, cementing the long-term place of the post office within the community.

 

I. How you can help get postal banking in Canada

First, you can start talking about it with your friends, relatives and co-workers. You can find more resources on postal banking at http://www.cupw.ca/en/campaign/resources/postal-banking

Second, you can contact your MP and tell him or her that we need postal banking. http://www.cupw.ca/en/campaign/postal-banking/resources/send-your-mp-message-support-postal-banking

Third, if your town or city is not on this list of ones supporting postal banking, please contact your councilor or mayor and get them to pass a resolution. http://www.cupw.ca/en/campaign/resources/municipalities-and-groups-have-passed-resolutions-or-sent-letters-support

Fourth, if your labour council or your union or your community organization or NGO has not passed a resolution in support of postal banking, get one passed.
Fifth, if you need a speaker on this topic, please let us know and we will try to help you. 

CONTACT US AT:          
Canadian Union of Postal Worker
377 Bank St. Ottawa, ON     K2P1Y3
Telephone: (613) 236-7236
https://www.cupw.ca/
feedback@cupw-sttp.org

 


1.

Municipalities and groups that have passed resolutions or sent letters in support of expanding services like postal banking

http://www.cupw.ca/en/campaign/resources/municipalities-and-groups-have-passed-resolutions-or-sent-letters-support

2.

Burford latest community affected by rural bank closures, March 1, 2018

https://kitchener.ctvnews.ca/burford-latest-community-affected-by-rural-bank-closures-1.3823958

6.

Financial Consumer Agency of Canada, Banking Fees in Canada: Patterns and Trends 2014

14.

Canadian Co-operative Association, Co-Operatives in Aboriginal Communities in Canada, 2012

15.

    UK Post Office Annual Report 2015-16 http://corporate.postoffice.co.uk/annualreport1516

17.

ibid

29.

Patterson, Langlois Consultants, Canada Post Review, Research with Canadians, Final Report, August 29, 2016, Prepared for: Canada Post Review Secretariat, Public Works and Government Services Canada and Ekos Canadian Businesses' Views on Canada Post Services https://www.tpsgc-pwgsc.gc.ca/examendepostescanada-canadapostreview/rapport-report/recherche-reseach-eng.html