The Postal Savings System: A Global Perspective

The Postal Savings System is a global phenomenon with a rich history. It was first introduced in the United States in 1911 as a safe and accessible way for people to save money.

In many countries, the postal savings system is a trusted institution that has been around for decades. For example, in Japan, the postal savings system was established in 1875.

The postal savings system is a convenient option for people who don't have access to traditional banking services. In some countries, postal savings accounts are available at a fraction of the cost of traditional bank accounts.

In the United States, the postal savings system was discontinued in 1967, but its legacy lives on in countries like Japan, where it remains a vital part of the financial infrastructure.

The Postal Savings System has a rich history that spans over a century. In 1911, the US Postal Service created the Postal Savings System, allowing Americans to make deposits into no-cost savings accounts at post offices. This system was a public option, managed by local banks, and was incredibly popular.

The original deposit limit was $500, which was raised to $2,500 by 1918. By 1947, more than 4 million people had $3.4 billion in savings in over 8,000 postal units. The system was a safe and reliable alternative during the Great Depression.

The British Post Office Savings Bank was established in 1861, making it the first nation to offer such an arrangement. It was supported by Sir Rowland Hill and William Ewart Gladstone, who saw it as a cheap way to finance the public debt.

The British system first offered only savings accounts, but later introduced government bonds, war savings certificates, and lottery bonds. Within five years of its establishment, there were over 600,000 accounts and £8.2 million on deposit. By 1927, there were twelve million accounts, one in four Britons, with £283 million on deposit.

Many other countries adopted postal savings systems, including Japan in 1875 and the Netherlands in 1881. These systems were often successful, but some were later abolished or privatized.

India Post has provided financial services to rural and urban poor since 1882, when the Post Office Savings Bank was established.

The scope of financial services offered by India Post has grown over time to include other National Savings Schemes promoted by the Government of India. As of January 2022, India Post Payments Bank was serving around 50 million customers.

Japan Post Bank was the world's largest savings bank as of 2006, with 198 trillion yen (US$1.7 trillion) of deposits, mostly from conservative, risk-averse citizens.

China has a unique postal savings system.

The Postal Savings Bank of China was split from China Post in 2007 and established as a state-owned limited company.

It continues to provide banking services at post offices.

Some of these services have been separated into their own branches.

India has a long history of providing financial services to its citizens, dating back to 1882 when the Post Office Savings Bank was established.

The Post Office Savings Bank has been a vital lifeline for people living in rural or urban poor areas, who are often underserved by the formal banking system.

With the launch of India Post Payments Bank (IPPB) in 2018, the scope of financial services provided by India Post grew even further.

As of January 2022, IPPB was serving around 50 million customers, making it a significant player in the country's banking sector.

This achievement is a testament to the government's efforts to increase financial inclusion and make banking services more accessible to all citizens.

Japan has one of the largest postal savings systems in the world. Japan Post Bank, part of the post office, was the world's largest savings bank with 198 trillion yen (US$1.7 trillion) of deposits as of 2006.

The state-owned Japan Post Bank business unit of Japan Post was formed in 2007. This was part of a ten-year privatization programme aimed at achieving fully private ownership of the postal system by 2017.

South Korea has a unique postal banking system, with Korea Post offering banking counters and ATMs in all post offices, excluding postal agencies and delivery centers.

Korea Post's banking system is connected with all national and regional banks via KFTC, allowing customers to access a wide range of financial services.

Banking counters are also available for customers of Korea Development Bank, Industrial Bank, Citibank Korea, and Jeonbuk Bank, providing additional convenience and flexibility.

This extensive network of banking services makes Korea Post a valuable resource for the South Korean community, offering a convenient and accessible way to manage finances.

The Postal Savings System faced a significant decline in the mid-20th century. The establishment of the Federal Deposit Insurance Corporation gave a guarantee to depositors in private banks, making the system's advantage in trust obsolete.

By the 1960s, American banks had fully recovered and were more accepting of consumer deposits, rendering the Postal Savings System redundant. A campaign by bankers had been lobbying to create this impression, even though there were 1 million depositors.

The government passed legislation requiring the Postal Savings System to stop accepting deposits on July 1, 1967, and to transfer remaining deposits to a claims fund of the United States Treasury.

The Postal Savings System's decline was a gradual process that spanned several decades. It started losing its advantage in trust with the establishment of the Federal Deposit Insurance Corporation, which gave a guarantee to depositors in private banks.

A significant blow came with the rise of United States Savings Bonds during and after World War II, which drew funds away from the system. This was a major shift in consumer behavior, as people began to favor bonds over postal savings accounts.

By the 1960s, American banks had fully recovered and became more accepting of consumer deposits, rendering the Postal Savings System redundant. The system had 1 million depositors at the time, but a campaign by bankers had successfully created the impression that it was no longer needed.

The government passed legislation requiring the Postal Savings System to stop accepting deposits on July 1, 1967, and to transfer remaining deposits to a claims fund of the United States Treasury. This marked the end of an era for the system.

Accounts with unpaid principal balances of more than $25 are presumed to have been abandoned by their owners and are declared to escheat and become the property of the State if not claimed by the persons entitled thereto before June 1, 1971.

The Secretary of State must notify depositors whose accounts are to be escheated by mailing a letter to the named depositor at the last address shown on the account records, as well as publishing general and special notices in newspapers.

A single proceeding may be used to escheat as many accounts as may be available for escheat at one time.

The Secretary of State shall present a copy of each final judgment of escheat to the United States Treasury Department for payment of the principal due and the interest computed under regulations of the United States Treasury Department.

The payment received shall be deposited in the General Fund in the State Treasury.

The postal savings system offers a range of operations and options for users.

You can deposit money into your postal savings account at a post office, and withdrawals can be made in person or by mail.

One option is to open a postal savings account with a minimum deposit of $1. This account earns interest and is FDIC-insured, providing a safe place to save your money.

In the Philippines, you have the Philippine Postal Savings Bank (PPSB), also known as PostalBank. It's the smallest of the country's three state-owned banks.

PPSB is governed separately from PhilPost, the country's postal service. This separation allows for a more focused approach to banking operations.

As of 2017, Land Bank of the Philippines acquired PPSB at zero value, making it a subsidiary. This move has likely expanded the services and reach of the bank.

Today, PPSB is known as Overseas Filipino Bank, a name that reflects its focus on serving the financial needs of Filipinos abroad.

The Postal Savings program was initially used by non-farming immigrant populations for short-term saving.

These individuals turned to the program as a way to stash away small amounts of money, often in a safe and convenient manner.

The Great Depression brought a new wave of users to the program, who saw it as a safe haven for their savings.

During this time, people were desperate to protect their money from the economic downturn, and the Postal Savings program provided a sense of security.

By the 1940s, the program had become a long-term investment option for the wealthy.

Locations with banks still heavily relied on the Postal Savings program, indicating that it was only a partial substitute for traditional banking services.

A comprehensive public banking option is possible with FedAccounts, which are no-cost, no-fee, and no-minimum balance bank accounts managed by the Fed. This system would make banking accessible to all US citizens, residents, and businesses.

To make this option even more comprehensive, postal banking can be paired with FedAccounts. This would allow the post office to offer in-person banking services directly at its storefronts nationwide.

The post office already has a history of providing banking services, as evident from the popular Postal Savings System. This system shows that public banking can be effective in the US.

FedAccounts would require an act of Congress to implement, but public banking advocates are already making progress at the state level. For example, the California state legislature authorized a feasibility study on a no-fee, no-penalty bank account option known as a CalAccount in 2021.

A limited postal banking pilot program was also announced by the USPS to run in four US cities. This is a step in the right direction, but a more comprehensive system like FedAccounts Plus is still needed to address the economic distortions and social inequities caused by the private banking sector.