People don’t usually associate post offices with banks, but offering financial services through the post office network has proven an innovative way to expand access to banking in Europe, Asia and Africa, and postal banking seems to be arriving to Latin America. Some 60 percent of Latin Americans do not have a bank within reach, especially in poor neighborhoods and rural areas, explained Hans Boon, vice-president of the Dutch-based financial firm ING at a seminar hosted by the IDB. This translates into a lot of people who have trouble saving, sending and receiving money and end up stuffing cash under their mattresses—cash that could be pooled into large amounts and re-injected into the local economy.
At the same time, the region has a vast network of some 37,000 post offices, but they are often plagued by dated, inefficient services that can be a drain on public finances. What to do? Sixty countries in Europe, Asia, and Africa have been successful using the post office infrastructure available even in remote areas to provide convenient, easy, low-threshold access to financial services that breath new life into ailing postal services. As a result, 700 million people worldwide now have postal banking accounts.
Boon described a pioneer postal banking project in Brazil in which the government has partnered with a private bank. Brazil was looking for a way to expand financial services to poor rural communities that had no bank branches but did have a post office. After conducting the necessary feasibility studies, the government auctioned the multi-year contract for postal banking services to a private bank. The winner, Bradesco, launched a pilot project known as Banco Postal in April 2000 in just 36 post offices in the Amazon. Financial services have now been expanded to 5,000 post offices around the country. Banco Postal currently has 600,000 accountholders.
The Brazilian government and Bradesco worked closely with stakeholders during project design. The Ministry of Finance, which oversees banking operations, carried out the necessary regulatory reform that would allow the project to go forward. Trade unions were reassured that postal workers would not be laid off but instead be trained in delivery of the new services. Boon pointed out that because the regular postal service is dependent on letter mail, which faces stiff competition from high-quality private service providers like FedEx and DHL, its inefficiency was actually becoming a threat to employment.
Technological innovation is an important part of the Brazilian project. Bradesco electronically linked the post offices to its financial network, streamlining service delivery and lowering costs. The interconnection even gave the holders of other bank cards access to the ATMs installed in the post offices. Banco Postal initially offered deposit services and then gradually phased in bill payment, domestic remittances, credit and microfinance. Bradesco now plans to add international remittances, insurance, pension services and more.
The project also provides free or very low-cost access to the Internet and e-commerce to customers, thus helping to close the digital divide. The banking services, which are delivered by postal workers trained and supervised by Bradesco branch officers, have helped revitalize the postal service, drawing more customers to the post offices and boosting revenues.
Given that in Latin America as a whole, postal banking accounts for a mere 2 percent of post office income, compared with 30 percent in Europe, such services represent an opportunity for diversification, especially where postal services are running a deficit. And while the Brazilian initiative has been the pioneer in the region, it is no longer alone, added Boon. Postal banking services are expected to be launched in Uruguay through CorreoBanc, which plans to expand from bill collection to accounts-based services, while Costa Rica and Nicaragua have already implemented web-based online remittance services through post offices.