Could postal banking save Idaho’s rural post offices?

Need any stamps today? How about some cash or a loan?

That’s what might happen in rural Idaho post offices, in a move that could both help the post offices survive and bring banking services to unbanked communities.

The Postal Banking Act was announced last fall by Sens. Kirsten Gillibrand, D-NY, and Bernie Sanders, I-Vermont. It passed the House and died in the Senate, but legislators are considering bringing it back.

“The Postal Banking Act would strengthen the Postal Service by establishing a nonprofit bank offering low-cost checking and savings accounts, (automated teller machines), mobile banking and low-interest loans,” according to Gillibrand’s website. “According to a report from the (United States Postal Service) Inspector General, this proposal would create $9 billion in revenue for the Postal Service each year.”

In addition, it would help Americans otherwise limited to financial services such as pricey check-cashing facilities and payday loan companies, Gillibrand’s website noted.

According to the Federal Deposit Insurance Corporation (FDIC) study, “ How America Banks: Household Use of Banking and Financial Services” — conducted every two years with results released last fall — the percentage of unbanked people in Idaho has gone from 3.6% in 2015 to 2.3% in 2017 to 4.0% in 2019, the second-biggest increase in the U.S. after Connecticut.

Moreover, as banks have closed rural branches in response to business needs, several Idaho communities — including Grand View, Filer and now Shoshone, with the closure of its Wells Fargo branch — have been left with no branches.

While banks note how many services can be done online, that doesn’t help people dealing with cash, or who believe they have a better chance of getting a loan face-to-face from a banker who knows them. Moreover, rural areas don’t always have great internet or mobile data access, either.

“Having post offices be able to provide basic banking services would be really valuable to communities who do not have a bank,” said Connie Stopher, executive director of Southern Idaho Economic Development, in an email message. “Not having a bank nearby can be a real burden for people who are not able or not comfortable with online banking. It is also hard on small businesses who need cash in the register or who submit cash deposits.”

Having post offices offer such services wouldn’t cannibalize existing banks, Stopher said. “Most people would probably still use a traditional bank, either online or would drive to a neighboring community,” she said. “But, there are many people who cannot do that on a regular basis. Small business, the elderly and people with lack of access to transportation and internet services would all benefit from having banking services available in their community.”

Having post offices offer banking services isn’t new, even in the U.S. “Every other developed country in the world has postal banking, and we actually did too,” wrote Mehrsa Baradaran in Slate in 2014. “Postal banking, which existed in the United States from 1911 to 1966, was in fact so central to our banking system that it was almost the alternative to federal deposit insurance, and served as such from 1911 until 1933.” The program was abolished as part of streamlining the federal government, the article added.

The Idaho Bankers Association is against the proposal, said Trent Wright, president and CEO, in an email message. “Idaho Banks believe the banking industry’s best strategy as we oppose these proposals is to go on the offensive by making a concerted effort to reach the unbanked Idaho population through Bank On certified accounts and in addition Driving Authorization Cards for our undocumented population,” he said. “Congress should encourage the Postal Service to focus on its core business of physical mail delivery, and not be distracted by expanding the mission to businesses outside of its areas of expertise.”

U.S. Sen. Mike Crapo (R-Idaho), former chair of the U.S. Senate Committee on Banking, also opposes the idea. “Better solutions for areas with no bank branches or ‘banking deserts’ are more likely to come from the private sector and innovative technology, as opposed to expansion of government and the USPS’s role,” he said in an email message.