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December 26, 2014

Bankers can profit from being aware of disruptive forces

The banking industry is encountering various disruptive forces - including stiff regulations, the proliferation of online lending and innovative new lending activities - that bankers should monitor if they want to capitalize on existing opportunities.

USPS banking foray
A perfect example of one development that could significantly impact the sector is the suggestion that the U.S. Postal Service begin offering consumers financial products including small loans, prepaid cards and remittances, according to American Banker.

In January, the Postal Service's Office of Inspector General released a whitepaper, claiming that by offering financial services to the 68 million consumers who don't work with traditional banks, the USPS could earn close to $9 billion a year, American Banker reported.

When this idea was first floated, many industry experts reacted critically, with some arguing that the Postal Service should stick to transportation. Some contended that since the government organization has suffered financial challenges in recent years, taking on new ventures could create even broader problems.

Turning tides
However, the industry's tides have since turned, and many are warming up to the idea of the USPS offering banking services, American Banker reported. One major development that has coincided with this change of heart is U.S. Postal Service Inspector General David Williams emphasizing that instead of competing with private banks, he would like to partner with them.

While many still have their doubts, one sign of progress has come in the form of the North Carolina Bankers Association, a trade group for the southern state, volunteering to take part in a pilot program where the USPS offers banking products, according to American Banker. Williams helped elaborate on his plans during a speech given to the NCBA on Oct. 7. The attendees responded well, although they are seeking additional information, he said during an interview.

"The North Carolina Bankers Association said that in the near term, they'd like to work with us to help think of ideas and ways to go forward," he stated, American Banker reported. "And then they said, beyond that, they'd be interested in exploring the idea with the Postal Service of piloting the offering of financial services."

In addition to having this organization's backing, the USPS has a few other aces up its sleeve, industry expert Ryan Gilbert told American Banker. Gilbert, CEO of Billfloat, a non-bank startup that issues consumer loans with small principals, noted that the government organization has strong brand recognition, and also a sizable retail distribution channel.