Post offices target key role in financial services delivery
Given postal service operators' extensive branch networks, the provision of financial services is a natural choice for those operators seeking to diversify their revenue streams and fulfil government obligations to provide universal banking services. New research from VRL Publishing* reviews the evolving role played by post offices in the distribution of retail financial services and the opportunities and threats posed to traditional bank providers.
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Post office operators globally are increasing their presence in the financial services market, driven by a combination of economic need, market forces and regulatory reform.
Public postal operators are mandated to provide certain basic services to everyone, everywhere at reasonable cost. These services usually encompass letter post services and sometimes include the provision of payment, giro or savings services.
While postal operators are usually expected to maintain financial self-sufficiency, these universal services are often loss-making. The rise of remote communication technologies such as telephone and the internet have contributed to an erosion of domestic postal volumes, which constitute the bulk of postal operator revenues.
Many postal operators are trying to improve their financial situation by developing new revenue sources. Their strategies include the extension of existing products and services into internet and telephone channels and the launch of new products and services such as logistics and supply chain management services and financial services.
Most postal operators have traditionally offered basic payment services and access to savings schemes via post office counters. Postal operators are under pressure to expand the range of financial services they offer. This pressure comes both from governments that want to ensure universal access to basic transaction services such as bill payments and disbursement of social welfare or state pensions and from the need to secure alternative revenue sources to offset declining letter post revenues.
Postal operators are also keen to maximise the potential of their vast post office networks, including postal agencies operated by private individuals and organisations. 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.
Expanding the range
With millions of people regularly visiting and using the services of post offices, postal operators have increased the range and sophistication of the financial services offered through post offices, aiming to exploit their extensive retail presence and their trusted brands.
Financial services can make a significant contribution to postal services operators' income. This ranges from less than 10 percent in Denmark, Norway, Portugal and Spain, between 18 percent and 25 percent in France, Germany, Ireland, Poland and Switzerland, and rises to around 45 percent in Italy and Russia.
Indeed, the financial services activities of post office operators can constitute formidable competition to the traditional providers of financial services. With 11.5 million customers, Deutsche Postbank is Germany's leading retail bank, well ahead of the country's main commercial banks.
In France, La Poste's government-approved moves to transfer its financial services activities to a newly created postal bank in July 2005 have been keenly opposed by the French banking establishment, which has warned that it will watch closely for any signs of non-compliance with French and European regulations.
However, as the range and sophistication of financial services provided expands to include insurance, investment and lending products and services, postal operators become increasingly dependent on cooperation with financial institutions that have the necessary expertise and experience in those services. Some also face legal or regulatory barriers that prevent them from offering certain financial products directly, especially loans.
Alliances are widely used and have been very successful throughout Europe, offering post office customers a range of products and services that include life and non-life insurance, pensions and investment funds, mortgages, personal loans and credit cards.
An analysis of the role played by post offices in the distribution of retail financial services in the major European markets is set out below.
La Poste: Competing head on with French banks
With around 17,000 outlets, La Poste operates one of the largest post office networks in Europe. La Poste has committed to maintain about 17,000 outlets at least until 2007, although a growing number of post offices, especially those in sparsely populated areas, may be provided in partnership with local authorities and retailers.
La Poste's financial services offering will be transformed from July 2005 when it transfers its financial services activities to a newly created postal bank. The postal operator's deal with the French government in support of the establishment of a postal bank represents a major victory for La Poste and a setback for France's banking lobby.
La Poste already offers a wide range of financial services, with 45 million accounts and 4 million insurance contracts for 28 million customers at the end of 2003, but has traditionally been permitted to offer mortgage finance only to customers with home savings accounts. Its postal bank will be able to offer mortgage finance to all customers.
La Poste granted home loans to home savings account holders valued at 3.6 billion (euro) in 2003. Its home loans outstanding increased to 15.1 billion (euro) by the end of 2003, from 14 billion (euro) a year earlier. It also reported strong growth in deposits to home savings plans. La Poste's banking deposits accounted for about 8.7 percent of transferable deposits in France by the end of 2003, according to figures reported by the Bank for International Settlements.
La Poste customers opened about 100,000 net new postal banking accounts in 2002 and 2003, reaching 10.8 million accounts by the end of 2003. The ATM network, France's third largest, increased by about 6.7 percent to 4,450 machines. La Poste also had 6.3 million online banking customers.
The number of Cartes Bancaires debit cards in issue rose by 8 percent in 2003, reaching 4.4 million by the end of 2003. These cards are accepted on France's national interoperable ATM and debit card system operated by the bank consortium Groupement des Cartes Bancaires. La Poste is also one of France's largest merchant acquirers.
The fall in interest rates for regulated accounts in August 2003 and unsettled stock market conditions have a negative impact on deposit-taking, according to La Poste, which took in 4.4 billion (euro) in savings and sight deposits in 2003, down from 5.3 billion (euro) in 2002.
La Poste's most popular savings vehicle is life insurance, and the company earns commissions from the sale of CNP Assurances products, under an agreement that runs until 2007. CNP Assurances generated sales of about 7 billion (euro) through La Poste's network in 2003, an increase of 5.3 percent on the previous year.
La Poste is also a major provider of financial services to businesses, professionals and associations, having some 600,000 customers at the end of 2003.
Deutsche Postbank: Germany's leading retail bank
Deutsche Post World Net (DPWN) is one of the largest and most successful postal services companies in the world.Apart from its role as the universal postal operator in Germany, it also owns DHL, one of the world's largest providers of express delivery and logistics services, and Deutsche Postbank, Germany's leading retail bank.
The German government first began to reduce its stake in DPWN by means of an initial public offering in November 2000. It now owns a 56 percent stake: 20 percent directly and 36 percent through the state-owned KfW banking group. Similarly, DPWN floated one-third of Deutsche Postbank's shares on the Frankfurt stock exchange in June 2004, retaining the remaining two-thirds.
With around 11.5 million customers at the end of 2003, Deutsche Postbank is Germany's leading retail bank, ahead of Deutsche Bank with 8.4 million customers and Dresdner Bank with 4.5 million customers.
The post office network of Deutsche Post is key to Postbank's strong market position.
Postbank services were offered at more than 9,000 Deutsche Post outlets at the end of 2003, including about 780 large retail outlets housing Postbank Centres, which offer the bank's full range of retail banking products as well as consultancy services relating to investment advisory services, mortgage lending and consumer loans.
The bank also operates about 2,000 ATMs and provided customers with fee-free access to another 5,000 ATMs of the cash group, a joint ATM network operated by Postbank with the major commercial banks Commerzbank, Deutsche Bank, Dresdner Bank and HypoVereinsbank (HVB).
The bank's core product is the fee-free current account. The bank added about 439,000 current account customers in the first nine months of 2004, taking the total to about 4.4 million.
Postbank increased its credit card market share in 2004; according to preliminary figures, the number of cardholders rose by over 11 percent to almost 747,000, compared with total market growth of only 1.2 percent. Credit card sales topped 1 billion (euro) for the first time.
Its savings volume rose by 2.7 percent in the first nine months of 2004 to 40.1 billion (euro), boosted by the success of the DAX Sparbuch, Postbank Gewinnsparen (Save and Win) and SparCard 3000 plus direkt.
Postbank posted strong growth in residential mortgage lending during the first nine months of 2004 through a combination of organic growth, expansion of its DSL brokerage business and acquired portfolios. New residential mortgages totalled 5.4 billion (euro) for the period, up 86 percent year-on-year; DSL-branded loans and acquired portfolios accounted for 2.6 billion (euro) and 2.5 billion (euro), respectively. Residential mortgage loans outstanding reached 21.2 billion (euro) by the end of September 2004.
Postbank Vermogensberatung was launched as a mobile investment sales arm in 2003, building on the investment sales company acquired from Credit Suisse (Deutschland). The company, which aims to have about 300 commercial agents and advisers by 2005, is targeted at an estimated 550,000 customers with above-average incomes or investment volumes.
The insurance company PB Versicherung was established in May 1998 as a joint venture with the Talanx group, which owns the HDI insurance company. PB Versicherung, which offers life assurance, pensions and non-life insurance, reported gross premiums of about 68 million (euro) for the nine months ended September 2004, up 44 percent on the previous year.
Despite the wide range of services offered by Postbank and its units, its cross-selling ratio of 1.8 in 2003 was below its rivals' ratios. Its customers accessed 2.9 products on average.
BancoPosta: A significant contributor to Poste Italiane
Poste Italiane has one of Europe's largest post office networks: 13,726 outlets at the end of 2003, down from 13,747 in 2002. It has developed a multi-channel strategy in which the post office network is complemented by its postal carriers, websites, call centre and ATM network.
Poste Italiane's core banking offerings are managed by the BancoPosta division, although its internet services, such as internet banking, are managed by Postecom.
Poste Italiane's low-cost current account product, BancoPosta, has enjoyed spectacular growth since its launch in May 2000. The number of accounts jumped by 28 percent during 2003 to over 3.56 million and reached 4 million by the end of 2004. Some 350,000 BancoPosta account holders were also banking online.A BancoPosta current account is offered for businesses.
Both personal and business BancoPosta current accounts may be issued with ATM and debit cards–up to 500 cards per business account.These cards can be used free-of-charge at Poste Italiane's post office counters and its Postomat ATMs, and at the ATMs in the Cirrus/ATM network for a fee. Purchases can be made at retailers accepting Maestro cards, free of charge
The number of Postomat-Maestro ATM and debit cards in issue reached 4.8 million in November 2004, up from 4.6 million at the end of 2003. There were over 3,000 Postomat ATMs in BancoPosta's network in 2004.These were also linked to the banks' ATM network.
BancoPosta deferred debit cards are issued by Deutsche Bank. The outstanding balance must be settled monthly via a linked BancoPosta account. A revolving credit card known as Carta Ricaricabile is issued for BancoPosta by Agos Itafinco, the consumer credit company 51 percent-owned by Credit Agricole's Sofinco and 49 percent-owned by Banca Intesa.
In addition to the deferred debit card, Poste Italiane's BancoPosta division partners with Deutsche Bank to offer personal loans (Prestito BancoPosta) and mortgages (Mutuo BancoPosta).
Poste Italiane has long been a major recipient of household deposits. Deposits from passbook savings accounts and savings bonds at the post office accounted for 7.2 percent of the financial assets of Italian households at the end of 2003, up from 6.7 percent a year earlier, according to the Bank of Italy. These postal savings are held by, and represent the dominant funding source for, Cassa Depositi e Prestiti, a state-owned financial institution established to fund major public investments and works, such as infrastructure development.
BancoPosta's range of investment products includes mutual funds and bonds. Its funds management company BancoPosta Fondi, established in August 1999, ranked 29th among members of the investment funds management association Assogestioni, with 1.9 billion (euro) in funds by the end of 2003, rising to 2.2 billion (euro) at the end of 2004.
Spain's Correos y Telegrafos: Banking on JV with Deutsche Bank
The Spanish postal operator (Correos) was established as a state-owned limited liability company in 2001. As well as being responsible for the universal postal service, it is required to provide services for registered mail and insured items, money orders or giros, telegrams, telex and bureaufax.
Correos's broad universal service obligations mean that its branch network must provide a range of telecommunications and financial services in addition to traditional mail services. Business activities other than traditional postal services accounted for 18 percent of Correos revenues in 2003, and it expects that proportion to almost double to 35 percent by 2010.
The number of post offices in Spain has been in decline since the late 1990s. According to statistics from the Universal Postal Union, the total number of permanent offices declined from 4,527 in 1995 to 3,343 in 2003.
Some 488 post offices offer utility bill payments at 'energy windows', through agreements with major energy companies such as the electricity companies Endesa and Hidrocantabrico.
Correos fulfils its universal service obligations for giro payments by offering standard domestic and international money orders and express international money orders with Western Union.
The company launched its first Postal Transfer office in 2002 and had ten in operation by the end of 2003. Postal Transfer offices are aimed at serving the communications and financial services needs of immigrants. They offer a range of services that include traditional postal services, telecommunications, internet access, financial services and money orders.
Correos agreed an agency banking deal with the Spanish unit of Deutsche Bank in 1999, through which basic banking products such as current accounts, savings accounts and debit cards are distributed through Correos outlets. The postal company reported 19 percent growth in profits from its banking services in 2003. In the same year Deutsche Bank said that its agreement with Correos accounted for 130,000 of its 500,000 customers in Spain.
Post Office Limited: Providing agency services for UK banks
The UK boasts one of Europe's largest post office networks but the number of post offices continues to decline. There were 15,961 post office branches at the end of March 2004, compared with 17,239 a year earlier. Nonetheless, post office branches still attract high traffic–an estimated 28.8 million customers made 44.4 million visits each week in 2004.
In April 2003, the U K government began to automate benefits and social welfare payments by migrating from order books and giro cheques to payments via automated credit transfers (Direct Payment) to bank accounts. At August 2004, the Department for Work and Pensions reported that 72 percent of benefit accounts were paid by Direct Payment; the target is 85 percent by the end of 2005.
As a result of discussions between the UK government, the post office and the UK banking industry, benefits recipients were given three options for receiving payments at post office branches: a current account with a bank or building society, a basic bank account or a post office card account.
The post office already had agency banking agreements with a number of financial institutions, permitting current account holders to access their accounts at post office branches. Many basic bank accounts (low-cost accounts intended for electronic and automated payments and PIN-protected cash withdrawals, but without overdraft or cheque book facilities) can be used at post offices. By the end of September 2004, there were over 5.53 million basic bank accounts, of which almost 1.86 million could be used at post offices, according to the British Bankers' Association.
The post office card account was created for customers who would not want a bank account of any type. The account enables benefit and pension recipients to withdraw cash at post office branches but it does not permit payments other than the receipt of benefit, state pension and tax credit payments.
National Savings, which emerged from the Post Office Savings Bank, became an Executive Agency of the Chancellor of the Exchequer in July 1996, and was renamed as National Savings and Investments (NS&I) in February 2002.
The post office network is NS&I's main physical retail and distribution channel In the year ended March 2004, post office branches accounted for 45 percent of the value of NS&I's gross sales at 5.76 billion (euro) (8.48 billion (euro)), up 21 percent on the previous year. Post office branches handled almost 16 million NS&I customer transactions.
NS&I products offered through post office branches include premium bonds, savings certificates, capital bonds, individual savings accounts, capital bonds, investment accounts with passbook access and cash card-linked savings accounts.
The post office has long been a major provider of travel services such as foreign currency exchange and travel insurance services. It consolidated its strong position in the travel services market in May 2002 when it formed a joint venture, First Rate Travel Services, with Bank of Ireland's foreign currency exchange and travel services company First Rate Enterprises. According to Royal Mail, First Rate Travel Services became the leading provider of bureau de change services in 2003, securing a 20 percent share of the foreign currency exchange market. By August 2004, it was reporting market share of 26 percent. It also said it was the fifth-largest provider of travel insurance, with an 8 percent market share.
The post office and Bank of Ireland agreed to form a joint venture in 2003 to offer personal financial services products such as unsecured loans, credit cards, home loans and savings accounts. Bank of Ireland pledged to invest 125 million (euro) in the joint venture over the first ten years to provide core infrastructure and start-up costs.
The bank will provide or source the financial services products, while the post office will market and distribute the products through its branch network, over the telephone and online. The partners will share the profits of Midasgrange, trading as Post Office Financial Services, in which Bank of Ireland UK Holdings acquired a 50.01 percent stake in March 2004.
Europe's major postal operators
% derived
Operating from
Government income financial
Country Postal operator stake (%) (SDRm) (1) services
Austria Post Austria 100 1,361.8 n/a
Belgium La Poste 100 1,669.9 n/a
Denmark Denmark Post 100 1,202.8 4.6
Finland Finland Post 100 988.4 n/a
France La Poste 100 13,193.4 23.0
Germany Deutsche Post 56 35,056.1 18.5
World Net
Ireland An Post 100 602.7 18.0
Italy Paste Italiane 100 6,578.4 43.6
Netherlands TPG 19 3,327.6 n/a
Norway Norway Post 100 1,567.5 5.4
Poland Poczta Polska 100 1,047.6 25.0
Portugal CTT–Corrieos 100 547.0 7.3
Russia Russian Post 100 815.3 45.7
Spain Correos 100 1,500.9 1.5
Sweden Posten (2) 100 2,276.3 n/a
Switzerland Swiss Post 100 3,747.6 20.0
UK Royal Mail Group 100 10,368.2 n/a
Note: The figures refer to the financial year ended December 2003 or
March 2004.
(1) SDRs are Special Drawing Rights, the unit of account used by the
International Monetary Fund (IMF) and the currency used in Universal
Postal Union's postal statistics. All figures are converted to SDRs
based on IMF's year-end exchange rates, rounded to three decimal
points. For example, 1 SDR = $1.486 on 31 December 2003. (2) Figures
for Posten in figures are estimated based on Posten published results
and IMF currency exchange rates.
Source: Universal Postal Union, International Monetary Fund, Japan
Post, Posten
Europe's privatised postal banks
Country Bank Owner
Austria PSK BAWAG
Belgium De Bank van De Fortis (50%)
Post–La Banque
de La Poste
Czech Republic Postovni sporitelna Ceskoslovenska obchodni
banka (CSOB)
Denmark Girobank Danske Bank Group
Finland Postipankki Sampo
Hungary Postabank Erste Bank
Germany Deutsche Postbank Publicly traded (33%)
The Netherlands Postbank ING
Norway Postbanken DnB NOR
Poland Bank Pocztowy PKO BP (25%)
Portugal Banco Postal Caixa Geral de Depositos
Sweden Postgirot Bank Nordea
UK Girobank Alliance & Leicester
Post Office Bank of Ireland (50.01%)
Financial Services
Note: Correct at end 2004. Includes postal banking joint ventures
established by postal operators and private sector partners
Source: Banks
European branch networks 2003
Per million inhabitants Bank branches Post office branches
Belgium 480.9 130.3
France 419.5 164.3
Germany (1) 565.8 163.9
Italy 523.1 243.8
Netherlands 246.2 143.2
Sweden 205.6 134.5
Switzerland 361.4 367.6
UK 240.5 277.9
Note: Unless otherwise stated post office branch figures refer to the
number of branches offering cashless payment services, as reported by
the Bank for International Settlements (1) Bank branches include post
office branches offering Deutsche Postbank services
Source: Bank for International Settlements, Universal Postal Union
* Post Office Financial Services–Opportunities and Challenges in a Competitive Global Market by Anthony O'Brien is published by, VRL Publishing. For more information please contact Client Relations by telephone on +44 (0)20 7563 5687 or by e-mail to: [email protected]
