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Op-Ed: Postal service should ditch check
cashing
[The Center Square] Ross Marchand
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. |
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 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But most of the underbanked minority do not cite bank fees or minimum balance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.
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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.
Ross Marchand is a senior fellow for the Taxpayers Protection
Alliance.
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