Could Canada Post Step into the Void Left by TD’s Departure?

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Photo supplied. Postal workers hope this will be your new bank.

Conclusions on the Federal government’s postal review are expected shortly, and the rhetoric is heating up.

There is a feeling that the committee charged with the review has not seriously considered adding banking services to the mandate of this Crown Corporation.  Proponents argue that many Canadians in remote parts of the country are not adequately served by commercial banks, and adding this critical service to the roster of the existing network of Post Offices across the country could improve their viability at a time when their core business is under siege.

It seems our Council agrees.  At the June 19th they passed a resolution in support of postal banking in Canada, suggesting that the current review did not seriously consider postal banking despite the urgent need for this service in thousands of rural towns and evidence that nearly two million Canadians desperately need alternatives to payday lenders.

The Postal Workers Union has been making the case for postal banking in Canada for several years.  They remind us that the post office operated a national savings bank for more than 100 years, right up to 1969.  That operation was shelved because of the extensive penetration of commercial banks and the success of the bankers’ lobbying efforts.

Postal banking operates in many countries around the world, and each country has its own model.  Some postal administrations establish their own bank while others act as intermediaries for exiting financial institutions.  The extent of services offered also varies significantly, ranging from basic savings and chequing accounts, credit and debit cards and money transfers to more complex financial products including insurance, lending and investment products.

Not everyone shares an enthusiasm for a return to postal banking in Canada.  In a May 2016, the National Post’s Neil Mohindra suggested it would be less risky for the Post Office to offer tattoos than banking services.   He suggests that rather than increasing the profitability of the Post Office, banking services are likely to create another financial drain on it, which would require more taxpayer support and could ultimately result in more cuts to postal services.

The volume of advertising by financial institutions is an indicator of the degree of competition in the financial services and most Canadians would agree that we do not need another kind of credit card.  But when growing a township like Cavan Monaghan joins the ranks of the remote and rural communities without a financial institution, the argument in support of postal banking gains credence.

Entrance into this highly regulated and competitive market would require extensive investment even if the services offered were extremely limited.  The type of services required by communities without a bank includes cheque cashing, providing change for retail operations and money transfers which are labour intensive and the least profitable services provided by the banks.  The more lucrative investment products are subject to extensive layers of regulatory requirements through provincial securities laws and their delivery requires expertise, tight administrative procedures and risk management processes to protect the owners from the risk of its operation.

The idea of our postal system providing inclusive access to banking is appealing on many levels.  We are all fed up with record bank profits and exorbitant bank executive paycheques.  This is a political decision with significant economic implications and which requires serious analysis before making the leap. KG

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