Last weekend, in a bare, white-walled conference room in downtown Ottawa a group of trade unionists, economists and academics met to discuss a potentially revolutionary idea — that a bank could save Canada Post.
Not through a loan or a bailout, but with Canada Post creating its own bank.
The Canadian Union of Postal Workers (CUPW), has long said postal banking is the answer to the question ‘How do we save Canada Post?’
At CUPW’s postal banking symposium April 26-27, the union made the case that not only could postal banking help save jobs that are under threat of being cut by Canada Post management, but could also restore flagging revenues and improve quality of life for marginalized people.
“We want the Canadian public knowing that when we’re talking about the postal bank it’s something that works well in other countries,” explained Denis Lemelin, CUPW president. “And something that would be good for the public here.”
What is postal banking?
In essence, it’s a simple idea — the post office offers financial services alongside their traditional postal products. These can range from savings accounts and money orders to insurance and wealth management tools.
The reality of implementing a postal banking system can be more complicated, though it is certainly doable. A number of options exist for creating the system, including partnership with an already existing bank or credit union in order to provide certain services, or creating a homegrown operation.
While the idea of a postal bank may seem unusual in Canada, world wide it’s actually quite a common phenomenon. The Japan Post Bank is the largest deposit holder in the world and the Postal Savings Bank of China serves over 400 million customers.
Other countries’ postal systems have expanded into banking as a way of replacing lost revenues from the declining use of print postal products. At the symposium, representatives from postal unions in New Zealand and Italy outlined how expansion has allowed them to support normal letter carrying services while also employing a great number of people. For example, Poste Italiane employs over 140,000 people and has the largest logistical and technical infrastructure in the country. Their net profit in 2013 was 1,005 million euros.
Other countries use their postal banking systems as both a revenue generator and a social safety net. In France, where legally no one can be refused a bank account, La Banque Postale is often used by low-income earners who can’t get accounts at privately held banking institutions. It can also refer low-income clients to social service agencies.
John Anderson, the author of a Canadian Centre for Policy Alternatives report on postal banking, studied the postal banking systems of several different countries. He believes that adopting a similar system should be a no-brainer for Canada Post. “It’s an open and shut case, because we’ve got the proof in countries all around the world,” he said. “If it can work there, it can work here.”
Canada Post actually already offers a select few financial services despite the fact that they don’t have a banking charter. Ron Rousseau, the Aboriginal representative for the Canadian Labour Congress and a CUPW member, says the introduction of the postal money orders and the global Money Gram services were the result of pressure CUPW put on Canada Post to provide new financial products for customers. He, along with the rest of CUPW, hope the union can mobilize enough support to force Canada Post to develop a postal banking system.
But why will postal banking benefit Canadians?
As a society, we are often very concerned with the ability of our citizens to access clean water, food, shelter and health care. Access to banking rarely comes up in the discussion. But consider that to buy a house or open a small business, you must be able to access a bricks-and-mortar bank in order to get a mortgage or be approved for a small business loan.
But bank branches have slowly and steadily decreased in number and migrated out of low-income and rural areas. Most banks are now located in downtown cores or in high-income areas where customers are more likely to purchase high revenue generating wealth management products.
The result? An increasing number of people are unbanked or underbanked, meaning that they have limited or no access to banking services. In Canada, while there are no firm numbers on this, it is estimated that anywhere between three and 15 per cent of the population are underbanked. South of the border, the numbers skyrocket. In the United States, an estimated 25 per cent of the adult population — 68 million citizens– have no access or limited access to a bank.
The situation becomes worse as you move into rural and First Nations communities. Bank branches and credit unions are few and far between. Only 54 First Nations reserves have a physical bank branch or credit union. Residents who live on a reserve without a bank have to rely on the limited number of services available at the post office or drive to the next biggest town, which in some cases is thousands of kilometers away.
Linda McQuaig, journalist and social critic, spoke at the conference about why she believes this is symptomatic of the federal government’s reduction of services in rural and remote communities.
“I find it striking the arrogance and indifference of the Harper government of increasingly abandoning these rural communities with fewer and fewer services,” she said, citing cutbacks in northern rail service as another example.
The gap created by the lack of bank branches is filled by what Anderson describes as fringe financial institutions — pay-day loan lenders like Money Mart.
A study from British Columbia cited in Anderson’s CCPA report found that the average pay-day loan is $280 over a ten day period. In B.C., a pay-day lender can charge $64.40 for that transaction, which works out to an annual interest rate of 839.5 per cent.
“Eight hundred and thirty-nine per cent over an year it isn’t that much over you’re only going to do it for 30 days,” said McQuaig. “But that is an exorbitant amount. They are clearly picking on people who don’t have access to a proper banking system.”
Rob Fiedler, a graduate student in geography studying at York University in Toronto, mapped the spread of pay-day loan lenders in Canada at the request of CUPW. In the greater Toronto and Hamilton area, he noted that the pattern he found was easily identifiable to an urban geographer like himself — the pay-day loan lenders had set up shop in low-income areas.
CUPW argues that with the existing infrastructure of Canada Post, they can extend services to more people without charging the high interest rates that are found at the fringe financial institutions.
But can they generate revenue doing it? An overwhelming amount of evidence suggests that there is indeed money to be made from postal banking. The UK Post Office reported that 40 per cent of their current revenue comes from financial services. In France they expect that the bank will supply 65 per cent of total revenue by 2016. By 2020, they want a net profit of one billion euros.
There’s also the issue of job creation to consider. Currently, Canada Post doles out about $4.2 billion in salaries annually. With the job cuts management is currently proposing, there will soon be postal workers wwithout a steady income to do the things that help support the economy — buying houses, televisions and family vacations.
If Canada Post were to expand into postal banking, it could create a new revenue stream and continue to employ close the same number of people it is now — which is why Anderson describes it as a no-brainer solution.
Why isn’t Canada Post doing postal banking?
When Canada Post CEO Deepak Chopra announced that the post office would undergo massive cuts, including the end of door-to-door delivery service, it shocked everyone not least of all CUPW. While they knew the deficit and declining revenues from print postal products had to be addressed, they were hopeful that Canada Post would do it by expanding their services.
We now know that Canada Post did study, in detail, the viability of postal banking. An 800-page report uncovered by Blacklock’s Reporters indicated that Canada Post knew about the potential for revenue generation presented by postal banking. It also had detailed information on how postal banking works in other countries.
We don’t know exactly why Canada Post decided against going forward with the idea — because almost 700 of the 800 pages in the report were redacted. We do know that since the cuts were announced, Canada Post has been firmly against the idea of postal banking. In a statement provided to rabble.ca earlier this year, Anick Losier, the director of media relations at Canada Post, stated that it wasn’t feasible for Canada Post to pursue postal banking because it could not compete against the existing banks in Canada.
The power of existing bank structures present one of the more significant hurdles for any kind of a postal banking system in Canada. An International Monetary Fund (IMF) report found that the Canadian banking sector is one of the most concentrated in the world, with just five banks holding a significant amount of assets.
McQuaig argues that because the big five banks — RBC, TD Canada, CIBC, Bank of Montreal and Bank of Nova Scotia — have so much wealth, any attempt to create a public banking system will be met with opposition.
Another concern is the threat of privatization. A report presented by Simon Tremblay-Pepin from IRIS Recherche found that the fewer services offered by Canada Post, the easier it would be to privatize it and with privatization come more job losses.
Lemelin is concerned that no matter what happens with Canada Post, now that management’s “five point plan” is in place, it will try to justify privatization. “If it is not working, they may say okay, then they have a deficit,” he said. Similarly, if Canada Post begins to turn a profit, that may encourage management to sell the company for a higher asking price.
But these challenges aren’t stopping the people assembled at the postal banking symposium from trying to put postal banking on the national agenda.
“For 2015, I would love to see this become a big political issue in the election,” said McQuaig. “Because I think it’s something the Harper government could potentially be in a lot of trouble over if Canadians really understood [the issue].”
The idea has its supporters worldwide. Jim Sauber, a representative from the National Association of Letter Carriers in the U.S., told the symposium that his union has been meeting with rising political star Senator Elizabeth Warren, a proponent of postal banking, about establishing postal banks stateside. Here in Canada, the NDP have repeatedly expressed support for the plan.
Over the weekend, a former NDPer was on the minds of many of the attendees — Tommy Douglas. The founder of medicare started Canada’s health care program after a series of meetings just like the one that took place in the lower level of the Ottawa Marriot to talk about postal banking.
There was hope among the attendees that the idea of postal banking could be the start of something big — if they can bring the public over to their side.
“If you had a national campaign that was talking about…bringing these services to these communities, I’d think you’d get quite a bit of excitement,” said McQuaig. “It’s about rebuilding the country.”