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« Developing new ideas | Main | Will the Tories abolish cash? »

B. Off (old Fawlty Towers reference)

By Dave Birch posted Mar 2 2010 at 9:30 PM

[Dave Birch] I'm against the idea of the Post Office-based "People's Bank", although I understand why many people who haven't really thought about it find it so attractive: there's an anti-bank backlash, and people are looking for a sort-of-vague communitarian reinvention. After all, there is a serious problem that needs to be solved, and the Post Office might be a way to solve it.

Almost a million of the UK’s poorest people could be lifted out of financial exclusion if a new, simple-to-use bank account is launched by the Post Office. So says Consumer Focus, the statutory body that represents consumers’ interests in post office services.   The Government has already outlined plans [to] offer current accounts; children’s savings accounts; business accounts; mortgages and weekly budgeting accounts.

[From Post Office Bank a remedy for financial exclusion]

What a wasted opportunity. Instead of creating a new kind of financial institution, exploiting the new European regulations introduced under SEPA (such as the PSD, which came into force in the UK in November 2009), we in Britain can't help but formulate a ground-breaking, innovative approach to build something exactly the same as it would have been a century ago. I know we are a conservative bunch, but really! Are we just going to watch from sidelines and wave politely as the 21st century sails on past us?

As I've noted before, what is really needed here is not bank accounts but payment accounts. The first step on the ladder to financial inclusion is a simple way to make and receive payments. That's it. And a bank account is a very expensive way of providing this simple service. If the Post Office is to be used to increase financial inclusion, then instead of becoming another bank (we already have banks) surely it would make more sense to get the UK Post Office to do what the Italian Post Office does and become a channel for low-cost, pre-paid cards. In fact, lots of organisations that are nothing to do with conventional retail banking might become a channel for low-cost pre-paid cards. And, as frequently mentioned here before, these organisations might find the turbocharged combination of pre-paid cards and mobile phones a much more effective means of serving customers than trying to deliver lower cost versions of existing products.

For starters, consider the fact that the largest issuer of general prepaid cards in the U.S. is NOT a traditional bank (H&R Block according to Nielsen Research)... Now put prepaid and mobile together and what do you get? A bank in your pocket

[From Barbarians at the Gate: The Coming Disruption of Retail Banking - pymnts.com]

Well, not really. If it was a bank in your pocket then it would have all of the costs associated with banks and that's not what we should be aiming for. But the basic point is well taken: the combination of prepaid and mobile is very powerful.

Our experience, gained from a number of projects that involve both prepaid cards and mobile phone is that the combination of prepaid card and phone (in the O2 sense) is powerful even without technical integration between the two as in NFC. Provided that the cardholder can see the balance of the card on their phone, then they will use the card more.

[From Digital Money Forum: Not on the money]

For the financially-excluded in the UK, this combination is optimal. Almost all, if not all, of this constituency have mobile phones and have no real interest in other channels (eg, internet, branch banking, post) so there's no need to provide them. And the Post Office provides the perfect distribution channel for the prepaid cards as well as the load points. At the Treasury seminar on financial exclusion that I blogged about, more than one speaker reinforced the point that the excluded would prefer to use the Post Office rather than bank branches.

If these payment accounts, or whatever we want to call them (I'm trying to avoid calling them e-money accounts), are going to be delivered to the mass market at low cost, then clearly the regulators must not impose a regulatory burden

[From [ Digital Money Forum ]]

So instead of getting the Post Office to be a bank, which we already have lots of, why not get the Post Office to obtain an electronic money licence and then form a joint-venture with someone to obtain a payment institution licence: then the Post Office could join MasterCard and Visa and issue their prepaid cards or issue its own prepaid non-scheme cards (thus creating a European-style third scheme with other Post Offices) that the acquirers would simply switch to them. The existing Post Office Card Account (POCA) could migrate to a Post Office Payment Account (POPA) and offer G2C, P2P and other services.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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