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Post Office Financial Partnership

By: VRL
Published: 17th July 2009

Post Office Financial Partnerships

As a result of pressures caused by a rise in communication technology, high cost bases, the cost of transport and increasing market liberalisation, operators are becoming more interested in expanding their range of financial services, either from the need for extra revenue, or under pressure from their government owners to ensure universal access to basic financial services.

With millions of people regularly visiting and using the services of post offices, postal operators can aim to exploit their extensive retail presence and their trusted brands.

Suffering under the burden of rising fuel costs, pension payments and alternatives to traditional letter post, and boasting a retail network far bigger than that of the banking network, an expanded financial service offering is the next logical step for many postal providers.

This report covers:

  • Post office financial partnership
  • The postal system
  • The postal services market
  • Market liberalisation
  • The postal organisation
  • Exploiting ubiquity - the post office network
  • Postal financial services
  • Alternative payments 
  • The unbanked

Read this report to:

  • Make a post office financial partnership work for you
  • Utilise the ubiquity of post offices
  • Learn best practices and read case studies from 12 countries
  • Assess various alternative payment methods and choose the best
  • Find out how to appeal to the unbanked

Country Studies: Australia , Brazil, Canada, People's Republic of China, France, Germany, India, Italy, South Korea, Switzerland, The UK, The US

 

While postal operators are usually expected to maintain financial self-sufficiency, these universal services are usually loss-making, and face major challenges from:

- the rise of remote communication technologies have contributed to an erosion of domestic postal volumes, that contribute the bulk of postal operator revenues;

- the struggle to restructure high cost bases.  However, management faces stern opposition from highly-organised workers’ groups determined to fight job cuts and reluctant to change work practices.

- the persistently high cost of transport has placed a major burden on organisations tasked with regularly delivering services to remote communities.

- most public postal operators have traditionally had a monopoly on certain services, but market liberalisation has gathered pace and traditional monopoly services are under threat.

As a result of these pressures, operators are becoming more involved in providing or expanding their range of financial services, either from the need for extra revenue or under pressure from their government owners to ensure universal access to basic financial services. With millions of people regularly visiting and using the services of post offices, postal operators can aim to exploit their extensive retail presence and their trusted brands.

This report is the third edition of the VRL on Postal Financial Services.

Since the publication of the 2nd edition in October 2007, many of the trends described above have accelerated, and the problems faced by the post offices have mounted.

Nonetheless significant opportunities have emerged. The impact of the credit crunch has severely dented the reputation of a number of mainstream financial providers, while the reputation of the post office in many territories remains undiminished.  As the 2nd edition reported:

‘Some postal operators are even looking for permission to operate retail banks, following the lead of New Zealand’s Kiwibank and Germany’s Deutsche Postbank.  France’s La Poste plans to transfers its financial services activities to a newly-created …the deal marks a major victory for the postal operator and a setback for France’s banking lobby….however, such victories are rare and there is widespread opposition to the prospect of a government-owned organisation operating a retail bank.’

The near nationalisation of major banking players around the world has dissolved some of the old ideological barriers that prevented the growth of postal financial services. Some governments are even wrestling with the issue ‘how big should any individual banking group be allowed to become’, which suggests the possibility of a permanently expanded state banking sector. In addition:

- the withdrawal of many lenders from sub-prime lending leaves an opportunity for the post office as an existing provider of  services to underbanked segments.

- the credit crunch has highlighted the need for enhanced financial education – the post office is well-placed to be a vehicle for this service.

- the closure of many branches has enhanced the position of the post office retail network on the world’s high street. Universal service obligations require many postal operators to maintain a certain number of post offices and to serve smaller and more isolated communities not served by other businesses such as financial institutions.

The major opportunity highlighted in the 2nd edition of this report was for:

‘postal operators and post office networks can facilitate remittances from workers abroad, mobilising savings through savings schemes for remittance recipients and using those savings funds to provide microcredit or microfinance to entrepreneurs.

Postal operators sometimes leverage their relationships with major billers to offer bill payments over the counter and in other channels such as over the telephone or via the Internet.’

While the global market in remittance payments has plummeted, the broader opportunity in alternative payment mechanisms has opened up, and global post office networks are well placed to take advantage, given their existing role in bill payments.

Opportunities for Partnership

Legislative change have made it easier for postal operators to create specialised subsidiaries and to form alliances or partnerships with private-sector organisations such as financial institutions, and to respond more rapidly and effectively to emerging market opportunities.

Postal operators that offer more sophisticated financial products must usually enter into an alliance or partnership with a financial institution.  These alliances range from simple sales or distribution agreements from third-party financial products, through agreements for the provision of own-branded financial products by postal operators to joint ventures.

These alliances are widely used and have been very successful throughout Europe, from Ireland to Italy and Portugal to Poland, offering post office customers a range of products and services that include life and non-life insurance, pensions and investment funds, mortgages, personal loans and credit cards.

While some postal operators can go it alone, there remains huge potential for partnership between postal operators and financial institutions, even in markets where postal operators and postal banks already offer a range of financial services.  Such alliances could produce major financial rewards for the partners.  They could also deliver social dividends, ensuring that as many people as possible have access to basic services, encouraging economic growth and development, and transforming the fortunes of many, including the poorest.

 

Executive Summary

Chapter 1: The Postal System

Introduction

The Universal Postal Union

Chapter 2: The Postal Services Market

Mail volumes under pressure

Universal Postal Services

Leveraging new technologies

The high cost base

Chapter 3: Market Liberalisation

Competition and privatisation in postal services

Chapter 4: The Postal Organisation

Organisation and legal structure

The legal structure

The organisation structure

Working with the postal bank

Restructuring to provide financial services

Reforming postal organisations for savings mobilisation

Chapter 5: Exploiting Ubiquity – The Post Office Network

Improving Post Office efficiency

Increasing Post Office revenues

Social welfare and pension payments

Post offices as retail outlets

Post Offices and other channels

Chapter 6: Postal Financial Services

Government services and postal payments

Government services

Postal payments and remittances

Agency banking services

Postal savings and postal bank accounts

Life and non-life insurance

Investments and consumer credit

Investment services

Loans

The potential of postal financial services

 

Appendix 1: Alternative Payments

Appendix 2: The Unbanked

 

Part 2: Country Studies

 

Chapter 7: Australia

The postal operator

The post office network

Postal financial services

Bill payments

Agency banking services

Money transfer services

Chapter 8: Brazil

The postal operator

The post office network and financial services

Postal financial services

Chapter 9: Canada

The postal operator

The post office network and financial services

Online bill payments

Chapter 10: People’s Republic of China

The postal operator

The post office network

Postal financial services

Postal savings

Postal payments

Chapter 11: France

The postal operator

The post office network and financial services

The post office network

Financial services

Chapter 12: Germany

The postal operator

The post office network

Financial services

Deustche Postbank

Chapter 13: India

The postal operator

The post office network

Financial services

Payment services

Banking services and savings schemes

Postal life insurance

Chapter 14: Italy

The postal operator

The post office network and financial services

BancoPosta current accounts

Payments cards and loans

Post Office payments

Savings products

Investment funds and insurance

Chapter 15: South Korea

The postal operator

The post office network

Financial services

Payments and agency services

Postal savings and banking

Postal life insurance

Chapter 16: Switzerland

The postal operator

The Post Office Network

Postal financial services

Postal transaction accounts and payments

Investment funds, insurance and savings

Consumer lending

Chapter 17: The UK

The postal operator

Market regulation

The post office network

Financial services

The post office and automating benefits payments

Post office payments

Savings

Expanding financial services

Chapter 18: The US

The postal operator

Postal reform

The post office network and financial services

The rise and fall of eBillPay

Money orders and remittances

The legacy of the postal savings system

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Retail Banking Products:

Publications:

Retail Banker International
Banking and Payments Asia

Conferences:

Retail Banking and Cards Forum, September 2010, Bahrain (TBC)  
Retail Banking/Payments Innovation, Kuala Lumpur, 11-12 May 2010

Roundtables:

Retail Banking/Payments Asia Roundtable, detailed subject matter TBC, Hosted by Titien Ahmad, VRL Asia-Pacific, and Hugh Fasken, Editor, Retail Banker International, August 2010

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