Postal services play a key role in
many nations, providing access to basic communication and
transaction services. Public postal operators are among the largest
employers and most trusted retail network operators in each
country, generating hundreds of billions of dollars in revenue.

While postal operators are usually expected to
maintain financial self-sufficiency, these universal services are
usually loss-making, and face major challenges, including:

• the rise of remote communication
technologies which have contributed to an erosion of domestic
postal volumes that contribute the bulk of postal operator

• the struggle to restructure high
cost bases. However, management faces stern opposition from
highly-organised workers’ groups determined to fight job cuts and
reluctancy to change work practices;

• the persistently high cost of
transport which has placed a major burden on organisations tasked
with regularly delivering services to remote communities;

• most public postal operators have
traditionally had a monopoly on certain services, but market
liberalisation has gathered pace and traditional monopoly services
are under threat.

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As a result of these pressures, operators are
becoming more involved in providing or expanding their range of
financial services, either from the need for extra revenue or under
pressure from their government owners to ensure universal access to
basic financial services.

With millions of people regularly visiting and
using the services of post offices, postal operators can aim to
exploit their extensive retail presence and their trusted

Acceleration of market

This report is the third edition of
the VRL report on postal financial services. Since the publication
of the 2nd edition in October 2007, many of the trends described
above have accelerated, and the problems faced by the post offices
have mounted.

Nonetheless significant opportunities have
emerged. The impact of the credit crunch has severely dented the
reputation of a number of mainstream financial providers, while the
reputation of the post office in many territories remains

The near nationalisation of major banking
players around the world has dissolved some of the old ideological
barriers that prevented the growth of postal financial services.
Some governments are even wrestling with the issue ‘how big should
any individual banking group be allowed to become’, which suggests
the possibility of a permanently expanded state banking sector. In

• the withdrawal of many lenders
from subprime lending leaves an opportunity for the post office as
an existing provider of services to underbanked segments;

• the credit crunch has highlighted
the need for enhanced financial education – the post office is
well-placed to be a vehicle for this service;

• the closure of many branches has
enhanced the position of the post office retail network on the
world’s high street. Universal service obligations require many
postal operators to maintain a certain number of post offices and
to serve smaller and more isolated communities not served by other
businesses such as financial institutions.

The major opportunity highlighted in the 2nd
edition of this report was that “postal operators and post office
networks can facilitate remittances from workers abroad, mobilising
savings through savings schemes for remittance recipients and using
those savings funds to provide microcredit or microfinance to

“Postal operators sometimes leverage their
relationships with major billers to offer bill payments over the
counter and in other channels such as over the telephone or via the

Opportunities for

Legislative changes have made it
easier for postal operators to create specialised subsidiaries and
to form alliances or partnerships with private sector organisations
such as financial institutions, and to respond more rapidly and
effectively to emerging market opportunities.

Postal operators that offer more sophisticated
financial products must usually enter into an alliance or
partnership with a financial institution. These alliances range
from simple sales or distribution agreements from third-party
financial products, through agreements for the provision of
own-branded financial products by postal operators to joint

While some postal operators can go it alone,
there remains huge potential for partnerships between postal
operators and financial institutions, even in markets where postal
operators and postal banks already offer a range of financial
services. Such alliances could produce major financial rewards for
the partners.

They could also deliver social dividends,
ensuring that as many people as possible have access to basic
services, encouraging economic growth and development, and
transforming the fortunes of many, including the poorest.