WASHINGTON -- The U.S. Postal Service quietly began offering paycheck-cashing services at several East Coast post offices last month, testing a plan that financial experts say has the potential to transform how low-wage and underserved Americans access their money.
Postal customers can now redeem paychecks in Washington; Baltimore; Falls Church, Va.; and the Bronx, N.Y., for Visa gift cards topping out at $500, an agency spokesperson said. Postal officials expect to expand the pilot into a fuller study with more locations and financial products, such as bill-paying services and ATMs, according to three people involved with the program who spoke on the condition of anonymity to discuss sensitive business strategy.
Postal banking has become a Democratic hobby horse in recent years, with activists and politicians saying it solves two problems: the Postal Service's precarious financial condition and the barriers many U.S. households face to building wealth and accessing their money.
For the nation's 14.1 million unbanked and underbanked adults, the plan presents a government-backed alternative to paycheck-cashing stores and payday lenders, which target vulnerable populations with high fees and interest rates. Democrats embraced the idea years ago: Sen. Bernie Sanders, I-Vt., made postal banking part of his 2016 and 2020 presidential platforms, and it was adopted by the Biden-Sanders Unity Task Force as part of President Joe Biden's 2020 campaign agenda.
The pilot program, while limited in scale, represents the mail agency's most ambitious push into financial services in decades. Though it sells money orders, it dropped most other banking services in 1966. It also signals that top leadership is open to the concept, a senior postal official involved with the program said, despite having some reticence about diving into a new line of business that would require significant technological and personnel upgrades.
"To be honest, these are pretty modest steps," the official said. "It's a small toe in the water. I think [the Postal Service] is just trying to see what kind of bite they're going to get. It's the symbolism that matters."
Union officials said they expect the program to reach other post offices nationwide after the holiday season. The Postal Service will soon begin advertising the paycheck-cashing service, and will use the increased foot traffic during the agency's peak season to gauge consumer interest and effective price points.
"The well-being of the Postal Service -- that the people in the country so overwhelmingly support -- in the future is partly going to rest on these kind of expanded services," American Postal Workers Union President Mark Dimondstein said in an interview. "New services will not just have the post office doing well by the people, but will bring in needed revenue."
The push also puts Postmaster General Louis DeJoy -- who has given millions to Republican causes, including Donald Trump's 2020 presidential campaign -- in league with some of his strongest Democratic critics. Sen. Kirsten Gillibrand, D-N.Y., introduced legislation in 2020 to reauthorize a larger suite of postal financial services. She also has called for DeJoy's firing because of declines in agency performance.
Service standards have fallen sharply since DeJoy took the helm in June 2020 with an eye toward cutting costs and finding new revenue; the mail service has $188.4 billion in liabilities and is projected to lose $160 billion in the next decade.
But even postal advocates express some skepticism the agency has the bandwidth for such an expansive line of business -- which likely would come with significant upfront costs -- in the midst of a pandemic that has hammered the agency's workforce.
Nearly 1 in 5 U.S. adults are unbanked or underbanked, according to the Federal Deposit Insurance Corp., meaning they do not have a bank account or the banking services available are insufficient to meet their needs.