The U.S. Postal Service’s Office of Inspector General issued a white paper on Monday suggesting that the postal service could earn as much as $9 billion by offering financial services and products to underbanked customers.
According to the white paper, more than 25 percent of all U.S. households are underserved—a total of 68 million adults who spent approximately $89 billion on interest and fees for alternative financial services in 2012.
The paper said USPS could partner with banks, which may be able to lend expertise as the agency begins to offer new products and services.
“The Postal Service could help financial institutions fill the gaps in their efforts to reach the underserved,” the paper reads. “While banks are closing branches all over the country, mostly in low-income areas like rural communities and inner cities, the physical postal network is ubiquitous. The Postal Service also is among the most trusted companies in America, and trust is a critical element for implementing financial services.”
The IG recommended that USPS explore offerings similar to those it already provides, such as money orders and remittance transfers, and that the postal service conduct small market tests to examine the viability of potential offerings.
According to the paper, payment services are most similar to what USPS already offers, and the IG said an open-loop reloadable prepaid card could be the “cornerstone” of USPS’ new offerings.
“Such a product would not only help to reduce the government costs associated with cash and check payments, it also would help fulfill the goal of bringing the underserved into the mainstream financial fold,” the paper reads.
Another offering idea includes products to encourage consumers to save. For example, USPS could partner with a bank to offer an interest-bearing savings feature on the postal card, thereby incentivizing customers to deposit a small portion of each check into savings.
The paper also said USPS could offer small loans for underserved borrowers to save them on interest rates and fees associated with poor or unestablished credit, which would boost the overall economy.
The IG said in the report that if USPS expanded its financial services offerings, it could translate to an additional $8.9 billion in revenue every year.
“A suite of financial services from the Postal Service could be a powerful new tool to help the underserved become more financially secure,” the report said. “There is a clear market need for innovative financial products, and millions of families would benefit from more affordable solutions. The Postal Service could be exactly what they are looking for.”