The postal system is a communication network of extraordinary proportions. There are over 660,000 post offices worldwide, the majority of them in rural areas, and each year the postal system handles traffic of over 330 billion letters and 670 million parcels. There are few places out of its reach and few people on earth without access to a post office, and it’s this proximity to clients that suits the postal system to the provision of financial services.
Postal banks boast a long history of success – the first being established in Great Britain in 1861 – and they are still the means through which millions of people worldwide have access to financial services.
Posts have an abundance of experience in providing cash-in, cash-out services, and they can generally be relied upon to have cash-management expertise. Posts’ experience in financial transactions (particularly domestic and international remittances), trusted brand image and proven capabilities in operating large-volume, small-margin commercial services make them particularly well-suited to the offer of digital financial services (DFS).
Posts provide numerous case studies of digital finance’s enabling factors. At the Universal Postal Union (UPU), we have identified five primary business models through which Posts engage in DFS.
Connecting post offices with mobile devices, for example, is exactly what UPU is doing with its International Financial System (IFS), a technical platform for Posts’ domestic and international electronic remittances. IFS makes use of our Electronic Data Interchange messaging standards to send international money-order data electronically, applying sophisticated data-encryption techniques to ensure the integrity of the data sent over the postal network. 70 Posts worldwide are party to the system, which was recently upgraded with mobile extensions to enable remote post offices to transact electronically using tablets or smartphones.
Leveraging their ubiquity, post offices very often play the role of cash-merchant for mobile money services. Mobile Money Operators (MMOs) need a network of contact points for registering customers and cashing money into or out of the system. The postal network provides just this capability, with a prime example in the partnership of Zimbabwe’s Ecocash and Burundi Post with Econet.
Posts have partnered with one or more Mobile Network Operators (MNOs) to distribute MNOs’ services, usually on a shared-revenue basis. Tunisia Post, for example, has teamed-up with three MNOs to give its clients access to these MNOs’ services in addition to the services it offers through its e-DINAR platform.
There are a range of Posts operating their DFS platforms independently of MNOs. In this model Posts develop their own technical platform based on mobile technologies. The solutions do not depend directly on MNO systems, but rather use mobile networks and smartphones merely as tools to transfer data. Morocco offers a case study of this model in Al Barid Bank (a postal bank) and its mobile application for e-banking. The UPU is currently working on a new upgrade of its IFS to provide such a solution on a large scale, a solution which will be integrated with the postal money-transfer network.
Posts have also formed their own Mobile Virtual Network Operators (MVNOs) to deliver mobile money services independently. Banks have bought MNOs and MNOs have bought banks to provide mobile money services, and this is not dissimilar. A good example is found in Poste Italiane’s establishment of Poste Mobile, with 75 per cent of Post Mobile’s subscribers using the financial services provided by Poste Italiane’s bank, BancoPosta.
UPU is participating in the ITU-T Focus Group on Digital Financial Services, contributing lessons learnt from its experience in operating a global network of international electronic postal remittances and in achieving interoperability with other networks. UPU has indicated that it sees scope to accommodate DFS in the Postal Payment Service Agreement, an inter-governmental treaty with 117 signatories.
With 20 years of experience in the IT industry, David Avsec has served as Account Relationships Coordinator and Deputy Director of UPU’s Postal Technology Centre (PTC) since July 2010. Previous to this, he was Product Manager for three years and IT Manager of the PTC during four years. He led the software development of various products in the PTC and in particular the IPS (International Postal System) and IFS (International Financial System), systems that are now used by nearly 170 postal operators worldwide. He has an engineering degree in Computer Science and Electronics from L’École des Mines (France), and an MBA from the Polytechnic School of Lausanne (Switzerland).