Turning Canada Post into Canada's Next Bank

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Friday October 25 2013

Last week, the Canadian Union of Postal Workers (CUPW) publicly launched its campaign to have Canada Post pursue banking services as a future area of business. The proposal to expand Canada Post into financial services is an important opportunity to innovate by providing quality financial services for Canadians while ensuring the crown corporation's financial success over the long term.

Regrettably, Canada Post has so far been unwilling to seriously consider this proposal, instead entertaining proposals to adapt to a reduction in mail volume by cutting back service and moving to alternate-day delivery. Equally remarkably, the Conference Board of Canada's recent report into the future of the postal service in Canada also dismissed financial services as a worthy option for Canada Post by claiming that 'Canada has a highly developed financial services sector,' thereby negating the need for a postal bank.

This, however, is a rather dubious position for the Conference Board -- whose own board includes the Canada Post chief executive officer, Deepak Chopra -- to hold given that many other countries with 'highly developed financial services' have successfully transitioned to postal banking, and that many sectors in Canadian society are under-serviced by traditional financial institutions.

Indeed, the United Kingdom, France, Italy, New Zealand and Switzerland have all pursued some form of postal banking. In the case of the latter, a recent report by the Canadian Centre for Policy Alternatives correctly observes that 'Switzerland's PostFinance, wholly owned by the Swiss Post Office, is the leader in money transfers and one of the largest banks in a country famous for its private sector banking.'

The same study notes, moreover, that it is estimated that between 3 and 8 per cent of Canadians do not have a bank account. Taking the low end of that range, that comes out to close to a million people. This is ultimately not surprising given that some 1,700 bank branches in Canada closed between 1990 and 2012, many in rural and low-income areas. (Concomitantly, there has been a notable growth in fringe financial institutions like pay day lenders, who charge ultra-high interest rates -- often well over 500 per cent on an annual basis.) Additionally, Canadian Aboriginal communities are underserved by traditional banks and credit unions, which have only 54 on-reserve branches for Canada's 615 First Nations communities.

Contrast this reality with the prospect of extending financial services through Canada Post's roughly 6,400 outlets, 60 per cent of which are located in rural communities. And consider as well that postal outlets already offer far better hours than banks, and often provide service six or seven days a week. Furthermore, being a crown corporation intended to serve the public, a Canada Post bank could provide special services for low-income Canadians and Aboriginal communities, and also facilitate social housing programs like the French postal bank does. As the United Nations' Universal Postal Union notes:

'After banks, postal operators and their postal financial subsidiaries are the second biggest world-wide contributor to financial inclusion, far ahead of microfinance institutions, money-transfer organizations, co-operatives, insurance companies, mobile money operators, and all other providers of financial services.'

Importantly, though, the above-mentioned international examples of postal banks show that a Canada Post bank could not only provide a good banking alternative for Canadians, but also generate strong profits for the government. In the case of Italy, 67 per cent of the Italian postal service's profits come from its banking and insurance services. And in New Zealand, the country's postal service generates 70 per cent of its profits via its KiwiBank.

As it turns out, the idea of a postal bank is not a new idea even in Canada. Canada Post operated a savings bank for 100 years, between 1868 and 1968. Then, when the postal service became a crown corporation in 1981, its first president, Michael Warren, argued that some 2,000 communities without traditional banks ought to be served by Canada Post. And today, the the corporation still provides some limited financial services like money transfers.

With the Conservatives' newly-claimed focus on consumers in last week's Throne Speech, it would seem that ensuring both a strong postal service and the launch of a new postal bank ought to be a priority for the government. In fact, this is what consumers want: a recent poll commissioned by CUPW found that 63 per cent of Canadians support 'Canada Post adding revenue-generating services, including financial services.' Yet, the Throne Speech barely touched on banking matters, only vaguely stating that the government will seek to 'expand no-cost banking services.'

Why not be truly bold and lead Canada Post into a new era of better banking services for Canadians? Indeed, the union has presented a sound and compelling idea to serve the public, make money and create jobs, but the crown corporation is saying no, we're not interested in better serving the public, making more money and creating more jobs!


Larry Rousseau, Regional Executive Vice President, Public Service Alliance of Canada