Postal banking is a system in which local post offices provide basic financial services, such as check cashing, savings accounts, and small loans.

The U.S. Postal Service (USPS) used to offer banking services through the Postal Savings System, which operated from 1911 to 1967. Today, however, those services are largely unavailable, though a scaled-down version of postal banking exists as a pilot program in four cities: Washington, D.C.; Falls Church, Virginia; Baltimore, Maryland; and the Bronx, in New York City.

Some critics say that allowing the U.S. postal system to provide financial services goes beyond its purpose and powers (Congress would need to enact legislation to allow it) and involves responsibilities that the USPS doesn’t have the infrastructure or capacity to manage.

However, proponents of postal banking say it can provide essential and cost-effective banking services to underserved or unbanked communities, especially in rural and low-income areas where traditional banks may not have a presence (aka banking deserts). Plus, it can provide an additional revenue stream for the USPS, especially in places where traditional mail volume is declining.

Here’s a closer look at how postal banking works, its benefits and drawbacks, and the likelihood of the U.S. once again adopting a postal banking system.

How common is postal banking?

Outside of the U.S., postal banking is fairly common. Some countries that offer postal banking include Switzerland, Portugal, Morocco, New Zealand, China, France, Iran, and Belgium. Other countries, such as Germany and Italy, offer some form of limited postal banking services.

In the United States, postal banking used to be a thing — a pretty big thing, in fact. When postal banking reached its zenith, 4 million Americans were postal banking customers.

The system was especially popular during the Great Depression, when many banks failed, and people sought safer places for their money. However, the rise of federally insured banks and the expansion of commercial banking services made postal banking less necessary. And by 1967, Congress voted to end it.

But some people feel that the time has come to revisit postal banking. Some politicians have championed the idea, and organizations such as the American Postal Workers Union have enthusiastically backed it.

A big reason why: An estimated 4.5% of Americans are unbanked, according to the FDIC, meaning they don’t own a bank account. Although that might not seem like many, it does represent about 5.9 million households. Another 14.1% of households (or 18.7 million Americans) are “underbanked,” meaning that the household does have at least one bank account, but also relied on at least one non-traditional financial service, such as money orders or check-cashing, within the past 12 months. And the costs associated with being unbanked or unbanked can be significant.

Read more: Can you cash a check without a bank account or ID?

Benefits and drawbacks of postal banking

If postal banking were re-established in the U.S., there would be a few major pros and cons to consider.

Pros

• Potential to save money. That’s the big reason why postal banking has its fans. The hope is that postal banking will undercut predatory companies that lend money or cash checks for exorbitant fees.

• Dependability. Some people don’t trust big banks. Post offices, on the other hand, are often considered to be reputable community institutions.

• Convenience. Many people are already familiar with their local post office, making the transition to using it for banking services easier.

Cons

• Limited services. Postal systems are traditionally not equipped to handle complex financial services. That’s why postal banking has been discussed as a concept that would offer limited banking services. Additionally, with the rise of digital banking and fintech, the postal system would likely require significant (and costly) upgrades to its digital infrastructure to provide competitive services.

• More government oversight. For those who don’t trust the federal government, you may not want them to have any more data on your finances than they already do.

• Risk to mail service: Expanding into banking might distract the postal service from its core purpose: delivering the mail. This could strain the postal system’s existing infrastructure and workforce, and lead to an overall decline in quality.

The future of postal banking in the U.S.

Nobody has a crystal ball, and it’s hard to tell how the future of postal banking in America might evolve. But it will probably largely depend on the political and economic climate.

Earlier this year, Jamie Partridge, the national organizer for Communities and Postal Workers United and a retired USPS letter carrier, did a radio interview with the nonprofit station WBUR, and made a strong case for postal banking.

“We used to have postal banking in this country, and there are many post offices across the world that use postal banking, and they, in fact, bring in more revenue through banking than they do through letter mail,” Partridge said. “And there's all kinds of ways that post offices, especially in rural areas, could be utilized, one-stop government services.”

Partridge also pointed out in the radio interview that the infrastructure for postal banking certainly exists, with “31,000 post offices across the country, and that's more retail operations than McDonald's and Starbucks combined.”

But again, postal banking is currently more of an idea than anything else — a banking concept that sounds promising but has yet to be delivered to the American public.