Time for Canadians to bank on Canada Post

Canada Post is “effectively insolvent.”

That’s how the CFO of the Crown corporation describes its current financial crisis. And this isn’t just due to falling mail volume. It’s insolvent because the corporation’s management refuses to do what successful postal services have already done: build a full postal bank that actually makes money.

In November, the corporation, which has posted operating losses every year since 2018, including a $748-million loss in 2023, submitted a “comprehensive transformation” plan to the government in its effort to move from cash-strapped to solvent. While few details are public, other national postal services facing the same pressures have already shown what works.

The most successful postal systems no longer depend on letter mail. In Canada, letter-mail volume has fallen by more than 60 per cent since 2006, and the old model simply doesn’t pay the bills. Other countries adapted. Canada Post didn’t.

Post Italiane, Italy’s postal service, earns only 13 per cent of its revenue from mail and parcels, with most of its income coming from banking and financial services. More than 70 countries offer some form of postal banking. In short, postal systems elsewhere survive because they treat banking as a core service.

Which raises an obvious question: why ignore an approach that works almost everywhere else? Canada is late to this shift but not too late to learn from it.

Canada once operated a national postal bank. From 1868 to 1968, the Post Office Savings Bank served nearly one million Canadians at its peak. Yet today, postal banking rarely gets serious attention, even though it reliably generates revenue in other countries. That reluctance helps explain why the corporation remains stuck in deficits.

So what would a modern Canada Post Bank actually deliver?

We modelled how a Canada Post Bank could perform today using data from Canadian banks and large credit unions. The numbers point in the same direction as international experience: postal banking works. And it is useful to compare its likely size with institutions Canadians already know.

A postal bank holding 2.5 to 3.5 per cent of all customer deposits in Canada, roughly $94 billion to $132 billion, would be larger than most credit unions but far smaller than the Big Five banks. With more than 6,000 post offices, many in communities that no longer have a bank branch, the corporation could offer lower fees, reach under-banked Canadians and still make money. Its scale would make it straightforward to run and expand.

Since 1990, more than 1,200 bank branches have closed in rural and low-income communities, pushing many people toward payday lenders. Canada Post will not reach a sustainable future if it focuses only on cuts and closures.

The payoff would be immense. In our most realistic, optimistic scenario, a Canada Post Bank would generate $1.4 billion in net revenue. That would erase the corporation’s operating deficit and fund improvements to services. Instead of managing decline, Canada Post could plan for the future.

A serious plan would invest in banking and financial tools communities actually need, especially in places long underserved or targeted by high-cost lenders. With so many public and private services withdrawing from inner cities and rural areas, turning post offices into community hubs with essential services such as banking would show that these communities still matter in national planning.

» Simon Enoch is a senior researcher with the Canadian Centre for Policy Alternatives (CCPA) based in Saskatchewan. Ryan Romard is a data analyst and researcher with the CCPA based in Ontario.

» Troy Media