This blog departs from the usual 'Technology and Posts' theme. Instead, the blog presents some interesting facts on how postal networks are utilizing their network reach and offering financial services to masses.
World over, postal service providers are either run by government agencies or have been privatized with a requirement to provide universal postal service. With such a mandate, postal service providers invariably have a wide network, and an unparalleled reach to even the remotest parts of the country. Such a network provides unique opportunities, especially in emerging economies, to promote local government's social policies, especially those involving financial inclusion.
Consider the example of Brazil's Correios Post. In 1999, a law was enacted that allowed banking services to be rolled out using non-banking infrastructure. Within 3 years, Correios started offering banking services (under the banner of Banco Postal) from its post offices in partnership with Banco Bradesco. Over next 10 years, over 11 million accounts were opened, reaching 95% of the country's population1, and allowing millions of Brazilians to save money and also gain access loans and mortgages.
Postal service providers can offer banking services from the post offices, especially, in rural and/or remote areas, where commercial banking operations may not be financially viable. These postal banks could offer services like small savings accounts, small loans, insurance services and even remittance services to the people through the post offices. Open market auction of the rights to use postal network (by a commercial bank) could bring in large cash inflows in form of contract fees, have access to a percentage of deposits held in these accounts, and receive a fee for every active account.
Alternatively, it could offer basic banking services. Post office Savings Bank of the Indian Post offers banking services, including savings bank, senior citizens savings bank and provident fund through it 154,000 post offices. This provides easy access to large amounts of cash, in form of savings deposits, which could be employed productively by the government. In December 2011, it was announced that Government of India is considering a proposal for setting up a full-fledged Postal Bank which would offer credit and loans. Latvian Post offers a basic bank account service allowing its customers to receive pension and government benefits, make payments, and transfer funds. Earlier this year, Estonian Post has announced that it is looking to expand its portfolio of the banking services offered at its post offices4.
These are all examples of postal networks being utilized to provide banking solution to the masses. Moreover, this offers a unique, and hitherto untapped, market for customizable core banking products such as Infosys' Finacle, as shown by the the recent contracts issued by Indian Post to modernize its IT systems. It is really interesting how the postal networks transform themselves in this digital age.
2 UPU publication - Union Postalé 4/2011
3 Indian Posts Annual report FY2010-11
4 Estonian Post Press release 01/12/2012