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The big banks are getting out of smaller communities. Is it time for postal banking?

Save community banks, save the post office: Time for postal banking in Canada

in Business/Community/Opinion/Poverty Reduction/Seniors by

One of the first things that the new Dominion of Canada did as a country, way back in April 1868, was create a postal bank. The idea was to create a banking system that everyday Canadians could access easily – and to serve customers that the established banks at the time showed little interest in serving. Postal banking existed in Canada until 1968.

All of the stakeholders of the postal system (Canada Post; Canadian Union of Postal Workers (CUPW) and the Canadian Postmasters and Assistants Association (CPAA) have examined the idea of re-establishing a postal bank. The CUPW and CPAA research relies heavily on the research of consultant John Anderson. His 82-page Why Canada Needs Postal Banking published by the Canadian Centre for Policy Alternatives contains some of the most detailed research on the topic.

Make no mistake: this is research funded by CUPW. And let’s face it: CUPW are a bit of a polarizing entity at the moment. So it’s perhaps not the most strategic time to be advocating for an increased role and more responsibilities for Canada Post — and its workers — in our life. The most recent strike no doubt rankled many of us, especially those of us waiting for Christmas gifts ordered online. And we are about to get another postage increase. On Jan. 14, 2019 a stamp bought in bulk will cost 90 cents. An individual stamp will cost us $1.05. That we can — in a time of $7 coffees — mail a letter from anywhere in Canada to anywhere in Canada for a measly $1.05 will be lost on those who use any excuse to bash Canada Post. I mean $1.05! That’s a whole nickel more than a non-existent buck-a-beer! But I digress.

You may or may not agree with the proponents’ claim that “Canada Post has the infrastructure, experience and legal right” to operate a postal bank. The NDP Canada Post critic, MP Irene Mathyssen (London-Fanshawe) certainly does. In an interview with the Lindsay Advocate, Ms. Mathyssen said that a postal bank “would greatly benefit smaller communities like those in the (City of) Kawartha Lakes and would bolster the post office.”

There is compelling data that suggests a postal bank could both be profitable and provide lower-cost financial services. Says Mathyssen, “Banking is lucrative. There is a reason why President’s Choice and Walmart have gotten into banking. A bank operated by the CPC wouldn’t have to charge exorbitant fees and it could still be profitable. Seniors and people without internet need access to a bank branch.”

Mathyssen’s private member’s motion to create a committee to study postal banking was debated in a second reading in House of Commons on October 22, 2018 — which happened to be the day that CUPW began their rotating strikes. The motion, of which Elizabeth May was a ‘joint seconder,’ was defeated two days later.

Despite this decision by the House, the idea continues to be championed. And there are some compelling arguments claiming that postal banking could address several problems, many of which speak to concerns within the City of Kawartha Lakes.

The Big Five Banks are Leaving Smaller Communities

The big banks are getting out of smaller communities. In 1990 there were 7,694 branches in Canada. According to the Canadian Bankers Association (CBA) in 2017 that number fell to 5,907 branches. Having small branches is just not part of the business plans of the Big Five going forward. In June of 2018, for example, the Royal Bank announced that it plans to reduce the total ‘square-footage’ of their branches by 20 per cent. Simply put, smaller bank branches in smaller communities are a dying breed. Just because there might be a bank in one of the smaller communities in City of Kawartha Lakes now doesn’t mean that it will be in the future. In fact, national trends and the banks’ own plans hint that it might not be.

RBC head office, Toronto.

Existing Bank Services are Expensive

Canadian banks are among the most profitable in the world. To be sure our centralized banking system along with strong regulation helped us avoid some of the worst parts of the 2008 recession. This comes at a cost though. Since 89 per cent of us use one of the Big Six banks, we are beholden to their rate and fee structures. A recent survey indicated that Baby boomers have already paid an average of $2,200 over their lifetime in Bank fees. Millennialls have paid an average of $760 and Gen-Xers (who came of age and started personal banking during massive fee increases) have paid an incredible $2,600 in lifetime fees. And Royal Bank — the one that plans to decrease branch space by 20 per cent? They made a record $3.1 billion in net profit in their third quarter of 2018 alone. It is no wonder most bank CEO’s made more money by lunch of Jan. 1 than most people reading this will all year.

Indigenous Communities

There are only 66 bank branches in the 700+ Indigenous communities in Canada which means over 90 per cent of these communities don’t have local access to a  bank. A banking system is fundamental to economic development and this is yet one more example where our country is systemically prohibiting economic growth in Indigenous communities.

In-Person Banking is Still Around

While many of us might do most of our banking on line or using mobile platforms, many Canadians still use branches. No doubt our use of digital banking is one of the main factors in the decline of actual bank branches. The CBA reports that 68 per cent of Canadians do “most of their banking” digitally and in-branch usage is dropping, but people still need branches. A study done by Credit Union Central of Canada showed that in 2015, 50 per cent of Canadians overall still used a bank on occasion and only 10 per cent of Canadians never use a branch. Branch use skews higher for older demographics. Given that Kawartha Lakes has an above average age we have to ask ourselves: how will our seniors who are not comfortable with technology or with no access to public transportation access financial services if or when the remaining branches leave?

Cheque-cashing Businesses are Robbing the Poor Blind

If there aren’t entire verses in the bible warning of the usury which payday loan companies practice, there should be. The exorbitant charges for cashing a cheque and the enticements for loans end up ‘legally’ robbing the most economically disadvantaged among us. The federal government’s own figures demonstrate the cost of borrowing $300 over two weeks: borrowing from a line of credit costs $5.81; from a credit card, $7.19; from a payday loan company, $63.00 — equivalent to a 546 per cent annual interest rate. Let’s face it — the City of Kawartha Lakes was chosen for the basic income pilot project for a reason and it wasn’t local government support. (Readers will recall that the council of the day would not pass a simple motion sent to all municipalities in Ontario from the City of Kingston, asking that they endorse having a national conversation about a basic income guarantee for Canadians.)

Simply put, we have a poverty rate above the provincial average. And we have a banking system that doesn’t serve let alone empower the poor. And we have a predatory secondary services system that legally robs them.

Banking Services’ silver lining

It is true that we no longer send regular mail like we used to. This is the rationale for the aforementioned postal increases. The creation of a new unit within Canada Post would provide a source of revenue to continue the less profitable door-to-door deliveries of regular mail. Would that save and possibly create jobs? Absolutely — but they would be jobs in our smaller communities.

Many will scoff at the mere thought of the government — through the post office no less– running a bank. But the federal government already runs four banks (Farm Credit, Export Development, Business Development and the Bank of Canada). And all of those banks are profitable.

Most of the developed world has some sort of postal banking system using any of several different business models and private/public involvement. Anderson quotes a report by the Universal Postal Union (the international organization of the postal services of 192 countries) stating that postal banks are “second to banks in their potential to contribute to financial inclusion” worldwide. In other words, postal banks get more people participating in the economy.

Since we already had a postal bank for almost 100 years of Confederation, we can safely assume we could, as a nation, figure out the ‘hows.’ We already have a lot of the infrastructure and we have federal bank employees to supplement where need be our postal employees, who already provide some financial services. As CUPW points out, Canada Post already: “sells money orders, credit cards and has an online bill delivery service, epost, which could easily be modified to allow bill payment online. Canada Post already has a secure delivery system in place, which can be further developed. Canada Post already has trained staff who can learn how to deliver new financial functions to support banking services.”

While we are in a “big idea” frame of mind, we might want to investigate postal banking as part of a larger repurposing of Canada Post as envisioned by the advocacy coalition Delivering Community Power. They imagine the post office of the near future to have “a renewable energy postal fleet; postal banking that provides inclusive financial services, especially to those underserved by commercial banks, like in rural and many Indigenous communities. There would be door-to-door mail carriers checking in on seniors and people with mobility issues, keeping more people in their own homes for longer; post offices as community hubs for digital access and social innovation, connecting communities and climate-friendly businesses to customers; and a consolidated last-mile delivery service that eases congestion in urban centres and reduces the environmental impact of our cities.”

Such transformation should start with postal banking, which has strong support nationwide. Over 661 Canadian municipalities and groups — including Barry’s Bay, Bancroft, Clarington and Oshawa — have passed a resolution or sent a letter of support in favour of postal banking. I would suggest that the City of Kawartha Lakes support that effort. Or at least publicly support a call for truly studying a system that could help our rural, senior and economically disadvantaged neighbours.

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A graduate of the University of Toronto, Trevor Hutchinson is a songwriter, writer and bookkeeper. He serves as Contributing Editor at The Lindsay Advocate. He lives with his fiancee and their five kids in Glenarm, Kawartha Lakes.

4 Comments

  1. On behalf of over eight thousand Postmasters and Assistants, I would like to thank the Lindsay Advocate and Trevor Hutchison for this article on restoring banking at the post office.

    Postal banking is especially important for the rural and remote areas served by our members. Postmasters who serve rural Canada’s smaller communities know all too well how ‘banking deserts’ affect our communities and their ability to thrive. Digital banking is not a magic wand for rural Canada because internet access is a huge issue for us too.

    CPAA members have worked in several pilot projects over the past decades that successfully paired banking and postal counters in communities such as Nain and Port-au-Port, Newfoundland, and Moose Factory, Ontario, with large Indigenous populations. Offering financial services proved popular: the two-year pilot project in Nain was extended for seventeen years.

    Around the time that M-166, the motion to restore postal banking, came up for debate, CPAA members met with many Members of Parliament, including Jamie Schmale, MP for Haliburton-Kawartha Lakes-Brock. While Mr. Schmale asked thoughtful questions, I was disappointed to see his recorded vote on M-166, was a “Nay.” We hope that Mr. Schmale and his party can be prevailed upon to support services that would benefit his rural constituents.

    We know that Canada Post, like many other postal services around the world, is looking at additional financial services. The question is what type of financial services model do we deserve? A model that benefits the Big 5 banks or one that works for all of us?

    Sincerely,

    Brenda McAuley,
    National President, Canadian Postmasters and Assistants Association

  2. Often, the reason the “poor” use the cheque cashing storefronts is because they can’t get bank accounts and therefore cannot cash their cheques. The reasons they can’t get bank accounts are apparently, significant. I think saying that a postal bank service will be able to remedy that situation is a premature and questionable claim. I don’t think the government is going to waive all the rules and just start cashing everybody’s cheques or giving everyone bank accounts.
    I’m not discounting some of the other points made here or that there may be a valid argument for further investigation into the return of postal banking but this particular claim of saving the poor from exorbitant rates puts up a big yellow flag for me.

    • Thank you for taking the time to comment. I don’t know if you have ever used these places. Speaking as someone who has — because of circumstance — used those services many times, I can tell you they have the same “ID” requirements as one would need to start a bank account. Basically, if you can cash a cheque at one of these places, you can open a bank account. The ability to get ‘credit’ at those places attracts many people. I do agree with you that this is a complicated issue and that creating a postal bank would not automatically eliminate the usury that happens at the cheque cashers.

      I think my basic point is still valid: that having a postal banking system that offered lower service fees could help everyone, especially lower income people.

      And thank you for pointing out my use of “poor” which I did purposefully. Just over a year ago, my family was forced to turn to foodbanks, the rent bank and any number of social agencies (and for a good couple years before that.) I self-defined as poor and probably still do until I remember my circumstances have slightly improved. For me, “poor” is a loaded word that captures the emotional toll that comes from not knowing how you are going to feed your family. A clinical term like lower income does not, in my opinion. Upon reflection, I should have stuck to “lower income”, even if that rings hollow to me.

  3. Postal banking is not the safest alternative as we have an increase in crime. I think they should devise a new method in which it can do with the same integrity but better security.

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