Definition
The term postal savings bank refers to financial institutions operated by post offices that took deposits and provided customers with access to a safe location to keep their money. Postal savings banks were originally established to promote thrift among the poor.
Explanation
Postal savings banks were first established in Great Britain in 1861 and catered to wealthy individuals living in larger cities. Eventually, more countries began to offer this service, ultimately catering to the poor with the objective of promoting savings.
The United States Postal Savings System was signed into law by President Taft in 1910, and provided this service from 1911 until July 1967. The US Postal Savings System initially paid 2% interest on deposits, while the money was placed in commercial banks earning 2.5%. The remaining 0.5% was used to pay for the cost of providing this service. These banks initially had an advantage over commercial banks because deposits were guaranteed by the full faith and credit of the United States government. The Banking Act of 1933 introduced Federal Deposit Insurance Corporation, which eliminated this advantage. At its peak in 1947, the United States Postal Savings System held $3.4 billion in deposits and served 4 million customers through 8,141 locations.
Countries still providing this service include: Brazil, China, France, Germany, India, Israel, Ireland, Japan, Kenya, South Korea, South Africa, Sri Lanka, Taiwan and Vietnam. Countries no longer offering this service include Austria, Bulgaria, Canada, Great Britain, Portugal, Finland, and the United States.
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