Finance & Economics

How the postal service became a bank

Post offices are already competing with traditional bank branches


How the postal service became a bank. Source:

Despite existing problems and gaps, conventional banks have remained the major providers of financial services for centuries.

However, there were always alternatives. Moreover, in view of the development of new technologies, this trend has begun gathering pace significantly. Traditional banks invented new money management technologies, such as online banking, mobile payments, p2p transfer services. Technological progress facilitated banking even in rural areas, and this is about messengers (WeChat), mobile network operators (M-Pesa), or even cab companies.

Postal banking is one of the most underrated alternatives to conventional financial institutions.

Let’s find out what postal banking is.

Postal banking is a way to use a post office as a financial institution, in order to make financial transactions.

This is not a new concept. It is as far back as 1861 that the idea to use a post office as a bank branch was first expressed.

The same year, in the UK, the world’s first postal banking service was launched. Since then, many countries somehow took the initiative to implement this technology, which is called Postbanks nowadays.

The new service was mostly intended for low-income people, which couldn’t afford to open a bank account, or just hadn’t a bank branch in their municipality.

Postal banking services available:

  1. Savings accounts
    Most postal banking services are, first and foremost, alternative to bank savings accounts. People can safely store their funds on such accounts. Nowadays it is the most popular Postbanks service.
    The British Post Office, for example, offers different account options and user-friendly functionality. Users can track and manage their funds online.
  2. Pension packages
    This service is also a very popular one. It often comes with a saving account service. Many employers and business owners don’t offer employees a pension plan, so it is no surprise that pension packages are so popular.
    Investment advisory services are also available in different countries (like the UK or Vietnam) Postbanks.
  3. Funds transfers
    This is also a vital option. People can send and receive money through the postal service even if they don’t have a Postbank account. Postbank Kenya is one of the best examples of this service. This institution has entered into a contract with the leading mobile money transfer platform M-Pesa in order to facilitate money transfers. Account-holders can now use their mobile wallets to access their funds.
  4. Postal deposit accounts
    This service is similar to conventional banking. Generally, it is a money depositing system, where a user receives interest.
  5. Loan service
    Some of the Postbanks also offer loan services. Vietnam, the South African Republic, New Zealand, and the UK already provide this service. The postal banking loan services are known for their favorable terms and rates, which are provided by special government programs. That’s why such loans are more affordable than those of traditional banks. Low-income people and aspiring entrepreneurs prefer this option.
  6. International money transfers
    Many national Postbanks have links with other similar institutions all around the world. It helps to transfer money abroad swiftly and smoothly. They can also cooperate with private entities. Western Union, for example, cooperates with several postal banks in the USA, Austria, and many other countries. That’s why Western Union offers more advantageous rates than many other similar services.

    Western Union cooperates with several postal banks in many countries. Source:

  7. Payment orders
    This service may come in handy for business owners, who need to accept payments and disburse them to their employees or suppliers. Similar to money transfers, a recipient is not obliged to have a postal banking account.
  8. Insurance policy
    This option is rare and not so popular for now. South African Republic institutions, for instance, offer basic insurance packages, which cover medical treatment and risks related to property and motor transport maintenance.

Postal banking advantages

In addition to the above-mentioned services, postal banking has even more advantages compared to conventional banks:

  • Extensive branch network
    State postal services don’t have to worry about branch network development. They already have the infrastructure in place, even in remote regions, which automatically provide access to clients of all statuses and income levels.
  • State control
    It is a well-known fact that most conventional banks are privately owned, and therefore, most of them are profit-oriented. Postbanks, on the contrary, are mainly state-controlled. This guarantees that their primary aim is to provide citizens with affordable financial services.
  • Stability
    A recent survey found that more than 2000 British bank branches were closed from 2010 to 2016. In comparison, during the same period, the number of postal branches almost has not changed.

Based on all such relevant facts, we have reached the clear conclusion that postal banking is an affordable, stable, and secure alternative to traditional banks.


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