What The Postal Service Could Learn From Google

October 5, 2021 at 9:35 am Leave a comment

Even as the world was struggling to survive several hours yesterday untethered to social media, the postal system was making a big splash with news of a small pilot program which could be the first step in reintroducing postal banking. While the post office was dabbling with banking, Google was quietly announcing that it was pulling the plug on its plan announced two years ago to work with banks and credit unions to provide google bank accounts. The two announcements have more in common than you might think. The announcements also contain important warnings for the credit union industry as it tries to navigate an uncertain future.

An article in the American Prospect reported that four postal branches in Washington D.C, Baltimore, Falls Church, Virginia, and the Bronx, NY were now allowing individuals to convert business or payroll checks of $500 or less onto a single-use gift card for a $5.95 purchase fee. The announcement was lauded by, among others, New York Senator Kirsten Gillibrand, a prominent supporter of postal banking.

It’s easy to dismiss the proposal. After all, it’s somewhat laughable to think that a business which cannot cost-effectively provide its core service to the American public, even though it has enjoyed a virtual monopoly for much of the country’s existence, will find its niche in cost effectively providing banking services.

This is where Google comes in. Your faithful blogger continues to believe that today’s Fintechs are tomorrow’s banks but in pulling the plug on its banking project Google discovered what many other Fintech wunderkinds have also discovered; providing cost-effective consumer financial services in a heavily regulated, highly competitive financial system is not easy. It takes a level of skill and knowledge that you don’t learn simply by attending business school or delivering the mail.

Just as Fintechs think they can easily handle the banking part of things, there are those, predominantly in the progressive wing of the Democratic party, who think that banking is as easy as setting up a branch and allowing individuals with no training as tellers to cost effectively provide banking services in a way which protects union jobs.

Common sense and history tells you that this is simply not the case. Postal banking is not a radical new concept but an idea that has been seriously debated since the 1800’s. In fact, between 1911 and 1966 Americans could open up postal banking accounts and at its height an estimated 10% of deposits were held in the postal system. But, as banking options became more widely available, and federal insurance stabilized the banking system, the system was put out of its misery by President Johnson in 1966. While I don’t think we have much to fear from postal banking, I do think that the industry has to recognize that proposals such as these are the result of frustration among some policy makers that the financial system has not done enough to help people of modest means. We must do a better job of telling our story and making sure our elected officials realize that the way to increase financial inclusion is not to get the government more involved in banking but to allow credit unions to provide more services to a larger group of people.

Entry filed under: Federal Legislation, General, Political. Tags: , , .

Levy and Restraint Protocols Impacted by NY’s Minimum Wage What To Do When Your Employee Requests A Religious Accommodation

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 755 other followers

Archives


%d bloggers like this: