One of the very 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 Canadians could access easily — and to serve customers that the established banks of the time showed little interest in, namely lower-income customers and those in remote communities.
Successful lobbying by the banking industry led to the elimination of the postal bank in 1968. Virtually all of the key players in our current 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.
Canada Post Corporation, an arm’s-length Crown corporation, conducted a four-year study on postal banking in the early 2000s. For reasons as yet unexplained by the corporation, 711 of the 801 pages of the report were blacked out, and all those pages were revealed only after a freedom of information request. One sentence on postal banking did survive the initial redaction: Canada Post describes the possibility of a postal bank as a “win-win strategy.” (Canada Post did not respond to questions posed by the Advocate on the study.)
The last time the House of Commons discussed postal banking was in October 22, 2018 — which happened to be the day that members of CUPW began rotating strikes. The motion was defeated two days later.
Kawartha Lakes-Haliburton Brock MP Jamie Schmale voted against the motion, which proposed a special committee to establish a plan for a postal banking system. In an interview with the Advocate Schmale said that while he too was concerned with access to banking for rural residents, he said the motion as stated “presented postal banking as a done deal” with no other options being considered.
There is a perception amongst some critics of postal banking that the idea is just a way to save jobs in an industry that is going through severe flux with the decline of letter mail and the increase of package delivery. Brenda McCauley, president of the CPAA (which represents more than 11,000 workers in more than 3,200 locations) says that postal banking is about more than jobs.
McCauley acknowledges that postal banking would address job security and possible growth for Canada Post. It would also address the gender wage-gap (the CPAA’s membership is 95 per cent female nationally and 97.6 per cent female in Ontario). But according to McCauley, “postal banking is bigger than that. It’s an important issue. It’s important to rural Canadians.”
There is compelling data suggesting a postal bank could both be profitable and provide customers with lower-cost financial services. Postal banking is profitable in countries like Switzerland, New Zealand, Italy and France, even when some of those countries’ traditional postal services lose money.
There are some compelling arguments claiming that postal banking could address several problems right here in Kawartha Lakes.
Smaller communities can lose out
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), by 2017 that number fell to 5,907 branches. Having small branches no longer seems to be part of the business plans of the big five banks. In June 2018, for example, RBC announced that it plans to reduce its number of branches by reducing the total square footage of its banking locations by 20 per cent. Simply put, smaller bank branches in smaller communities are a dying breed. Residents of Omemee and Woodville do not to be reminded of this trend, given the recent closure of bank branches in those communities.
Existing bank services are expensive
Canadian banks are among the most profitable in the world. 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; millennials have paid an average of $760; and Gen-Xers have paid an incredible $2,600 in lifetime fees. And RBC — the one that plans to decrease branch space by 20 per cent? It made a record $12.9 billion in net profit for the fiscal year 2019. It is no wonder most bank CEOs made more money by lunch of January 1 than most people reading this will all year, according to the Canadian Centre for Policy Alternatives.
McCauley notes that while it existed, the “postal bank had manageable fees.” Without having to support exorbitant executive compensation or be concerned about shareholder return, a postal bank can charge substantially lower fees.
There are only 66 bank branches in the 700-plus Indigenous communities in Canada, which means more than 90 per cent of these communities don’t have local access to a bank — yet one more example where our country is systemically prohibiting economic growth in Indigenous communities who are inclined to have less access to community-based loans, for instance.
In-person banking is still around
While many of us might do most of our banking online 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 still used a bank on occasion and only 10 per cent of Canadians never use a branch. Older people are more likely to visit a branch in person. Given that Kawartha Lakes has a population with 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 punitive
While so-called “payday loan” companies might seem like an alternative to local bank branches, the exorbitant charges for cashing a cheque at these companies and the enticements they offer 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.
Banking services’ silver lining
It is true that we no longer send regular mail as much as we used to. The creation of a new banking 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 — and they would be jobs in our smaller communities.
Many 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.
Schmale is among those who object to government involvement, stating that there are ways to provide service “where the government is not infringing in areas where the private sector is already established.”
He rightly notes that better and faster broadband (which can improve access to online banking) is needed in rural Canada. But even the most optimistic of plans — many of which are years from completion — only predict country-wide access by 2030. And broadband access doesn’t address the issue of those who cannot afford technology, nor does it help the people — especially seniors — who prefer to do their banking in person.
Most of the developed world has some sort of postal banking system using any of several different business models and private-public cooperation. A report by the Universal Postal Union (the international organization of the postal services of 192 countries) states 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 the ranks of postal employees, who already provide some financial services. As CUPW points out, Canada Post already covers a lot of this territory. It “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.”
The Advocate contacted the office of Anita Anand, Minister of Public Services and Procurement and the minister responsible for Canada Post for comment on postal banking. Anand’s press secretary, Marielle Hasseck replied, “Our government has introduced a new vision for Canada Post that puts service to Canadians front and centre. This includes reinvesting profits in services and encouraging innovative projects and partnerships to leverage Canada Post offices, to benefit all Canadians no matter where they live — including Canadians in rural, remote, northern and Indigenous communities. Extensive analysis and consultations were conducted in 2016.”
Hasseck’s response continued, “Our government heard loud and clear from the Canada Post review that it should focus its efforts on excellence in service in its core functions and we agree with that view. We are confident that the corporation will work to meet the changing needs of its customers and the communities it serves.”
It is unclear if that statement is pro- or anti-postal banking. What is clear is that the CPAA, the organization of postmasters and assistants, is fully committed to postal banking. In its most recent collective agreement (which as of press time had not been ratified) includes a provision for postal banking.
“If the contract gets ratified, it looks like Canada Post is willing to do a study on postal banking,” reports McCauley.
There is compelling evidence that postal banking can benefit rural Canadians, be profitable and address social problems while at the same time providing good jobs. The idea has strong support nationally; 661 Canadian municipalities and groups have passed a resolution or sent a letter of support in favour of postal banking.
It’s time for the City of Kawartha Lakes to support that effort, or at least publicly support a call to truly study a system that could help those in rural areas, seniors and the economically disadvantaged. It is time to go back to a system that worked for generations of Canadians. It is time for the return of postal banking.
Portions of this story first appeared in an article on the Advocate, online, published January 2019.