UPU News:-Posts must exploit untapped potential for financial inclusion

An estimated one billion people are currently banked through the postal network, but despite having the largest number of contact points in the world, Posts are underused for financial inclusion, according to new research by the Universal Postal Union.

Fifty-one postal operators worldwide held 1.6 billion savings and deposit accounts in 2010. With the average postal client holding an estimated 1.5 accounts, this brings the number of people banked through the Post to more than one billion, according to the research presented at the 25th Universal Postal Congress in Doha.

With 660,000 contact points in the world, Posts and their financial subsidiaries come only second to banks in their potential to contribute to financial inclusion. There are 523,000 bank branches and ATMs in the world, according to the International Monetary Fund.

“The postal network offers tremendous potential for fostering financial inclusion,” says Alexandre Berthaud, one of the report’s authors. “If only 51 Posts offering savings accounts can bank a billion people, then the remaining postal operators of the UPU’s 192 member countries, especially strongly populated ones such as Nigeria, Russia, Mexico, Ethiopia and Colombia, could easily provide a gateway to financially include at least 500 million unbanked people directly or through partnerships with banks.” 

The report recalls that several hundred million people also use the Post to make and receive domestic and international transfers or pay government or utility bills, whether or not they hold a postal savings account.

Providing a global panorama on postal financial inclusion, the research identifies five main categories of business models Posts use to provide financial services and key issues for them to keep in mind when providing such services or moving into more complex financial services. The report finally recommends how postal operators could progressively offer financial services.

New growth opportunities

Congress, the UPU’s supreme authority, last week adopted a resolution urging member countries to continue developing financial services. It recognized their value for contributing to the UN Millennium Development Goal of reducing poverty, as well as helping the growth of small and medium-sized businesses.

Financial services accounted for almost 12% of global postal revenues worth 304 billion dollars, according to 2011 UPU statistics. In several countries, such as China, India, Gabon, Tunisia, Bangladesh, Italy, Azerbaijan, Belarus and Burundi, postal financial services produce more than 50% of the Post’s revenues.

With the decline of letter-post volumes, financial services offer new growth opportunities for postal services, and they are gaining ground as Posts consider strategies to diversify the business. 

A Post’s success in implementing financial services depends on 10 key issues, including connectivity, financial capacity, automation, trust, and the existence of a legal and regulatory framework, among others, states the report.

Using capacity, automation and legal and regulatory framework as the three key indicators for success and giving them a specific weight, UPU researchers developed a success factor index and global ranking of countries evaluated. According to this global ranking, Morocco comes out on top as the developing country with the most potential for providing financial inclusion, followed by Serbia, Belarus, Malaysia, Indonesia, Tunisia, Kazakhstan, Brazil, China and Namibia closing the top 10.

The UPU hopes the index will be used to inspire Posts and governments to utilize the postal network as a facilitator of financial inclusion.