by Postal savings systems provide depositors who do not have access to banks a safe and convenient method to save money. Many nations have operated banking systems involving post offices to promote saving money among the poor.
India Post has provided an avenue for managing savings to the people living in rural or the urban poor, underserved by the formal banking system, since 1882 when Post Office Savings Bank was established.
Over time, the scope of financial services provided by India Post grew to include other National Savings Schemes promoted by Government of India. In 2018, India Post Payments Bank (IPPB) was launched as a regulated bank to provide a full set of banking services, as specialised division of India Post. As of January 2022, the bank was serving around 50 million customers.
IPPB aims to utilize all of India’s 155,015 post offices as access points and 3 lakh postal postmen and Grameen Dak Sewaks to provide doorstep banking services.
The Prime Minister of India, Narendra Modi, at the launch of the India Post Payments Bank, in New Delhi on 1 September 2018.
IPPB offers savings accounts, money transfer and insurances through the third parties, bill and utility payments.
Merchants Benefits
IPPB offers various benefits to the merchants with its Merchant Services:
Easy payment management
Use IPPB’s innovative Merchant App, which can be easily downloaded onto your smartphone.
Cost-effective
No charges for downloading IPPB Merchant app and registering as merchant.
Simple and secure
Accept digital payments from your customers.
Doorstep banking
Get cash management services at your doorstep.
Instant information
Access your account statements and reports at any time.
Track your business
Build a transaction history that enables you to create your positive credit score.
Drive a digital ecosystem
Avoid hassles of managing loose cash, small change, counterfeit notes or soiled notes
Issues:
Incoherent Proposals: Firstly, Sanders and Ocasio-Cortez have suggested two proposals, and they are contradictory. On the one hand, they want the credit card interest rates to be capped at 24% whereas, on the other hand, they want the United States Postal Service to provide payday loans.
Now, payday loans are inherently risky. They are typically given to customers who have a poor credit profile. Also, these loans tend to have a very high default rate. About 15% of these loans are never returned despite very aggressive collection practices. Hence, higher interest rates are required to offset these high default rates. If both proposals suggested by Sanders and Ocasio-Cortez are implemented simultaneously, they will put the United States Postal Service in serious jeopardy.
Different Skill-Sets: It is true that the United States Postal Service does have the real estate and the distribution network required for any successful bank. However, that is exactly where the similarity ends. This is because the workforce required for banking and postal services are expected to have completely different skill sets. For instance, bank employees are supposed to be financially smart and tech-savvy. This is because they need to deal with money and also use the software. Also, bank employees must be trained to spot money laundering and explain complex products to their clients in simple terms. Post office employees usually do not have any of these skills. Banks are also required to shortlist prospective borrowers and then underwrite loans. It is downright scary to allow post office workers doing these things even if they have been provided the requisite training.
The banking sector itself is becoming competitive. Tech-savvy fintech companies are revolutionizing the way banking services are provided. It is difficult to see how post office employees will be able to compete with such services. At the present moment, post offices do not have any digital or mobile banking services and building infrastructure from scratch will be expensive as well as time-consuming.
Post offices do not have any other infrastructure which is commonly required by banks as well. In a post office, there are no vaults or any other security features which are mandatory for banks.
Hotbeds of Corruption: America is not the only country which has thought of the idea of postal banking. Other countries like Japan have also experimented with this idea. At its peak, Japan had a postal bank which controlled over $2 trillion and was considered one of the largest banks in the world at that time! However, the Japanese experiment also failed. This was primarily because the Japanese postal bank started becoming a hotbed of corruption. Instead of lending out money to projects that deserved to be funded, Japanese banks would lend out money to the projects which were backed by politicians. As a result, a lot of bad loans got made, and the government ended up losing a lot of money in the process.
