Government Operations Committee on Sept. 17th, 2024

[John Anderson]

Personally, I think that the French postal banking system is the model I would prefer; however, a lot of the measures they undertook in the United Kingdom and in other places are partnerships they have done with private banks to deliver certain services.

I think that moving in the direction of postal banking services is what is key. There are different ways of doing it, but I think we can move in those directions. Certainly the partnership with TD could have been an interesting one; however, it was cancelled.

I think that any moves toward more financial services being delivered through the post office, with the post office controlling how they're delivered.... How those partnerships exist, of course, is up to decisions at a particular time of what can be done.

[Jenica Atwin, Liberal, Fredericton, NB]

You mentioned moving toward this, but you also mentioned that, up until 1968, Canada and the U.S. had postal banking services.

Can you speak a bit about what that looked like in operation and perhaps your opinion on why we moved away from it in 1968?

[John Anderson]

I think that's a Ph.D. thesis there, a doctoral thesis for somebody, as to why Canada and the U.S. dissolved their postal banking services in the same year. Obviously, there were a lot of private sector financial institutions that were not happy with postal banking being delivered at all, so it was ended fairly abruptly. I don't think that was a good measure, but it was done at that time.

It's interesting to know that in the United States as well—it's not just in Canada—there's been a revival of postal banking issues. In fact, I went to the United States and heard Senator Elizabeth Warren and Senator Bernie Sanders, who are both advocates, as are many others, around postal banking issues in the United States. There's a move to reconstitute that, for the exact same reasons that we're talking about here: closure of rural banking branches and the fact that you can't get banking services in large parts of the United States in the same way as you used to.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you.

You mentioned your preference for the Banque Postale model versus the U.K. post office. There are also other examples, such as Japan, Bulgaria, the Netherlands and Brazil. Many have been privatized or shut down.

Can you explain the mixed success of postal banking internationally and why the introduction of postal banking has often led to privatization?

[John Anderson]

I think that postal banking is still an extremely fast-growing phenomenon worldwide. The latest report shows that, so it's not something that is shrinking; it's growing worldwide in terms of the number of banking accounts, etc.

How a postal bank is managed, and whether it is managed in terms of a partnership with the private sector or a state-owned institution, depends a lot on the politics of the day in that particular country and how people see those developments.

As I said, we've seen very successful postal banking. I point to the French model simply because, obviously, Canada has a particular affinity with France and looks at what's happening in France for good reasons. That is one place where it has been very successful.

Even in the U.K., where it's not as extensive a model and where they've had private sector banks run the services for the post office, it's still a situation where you can go into any post office in the U.K. and deposit money, withdraw money, open savings accounts and all kinds of things like that, which is extremely important and which you cannot do in Canada.

I think we can do it in a number of different ways. Which is the best way to do it? I said that I have my preference, but I think that any step forward in terms of postal banking is important. It's important mainly for small-town and rural Canada, but also even in big cities where we have banking deserts. You have to go to the downtown or the central area of many Canadian cities, and you will find very few banking branches anymore.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Lemire, go ahead, please.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

Mr. Anderson, I would like to continue discussing rurality and the impact of postal services in Canada.

One consideration, when looking at how to operate postal outlets, is the decentralization of services. The link seems obvious to me. You have to trust people in the regions to provide a multitude of services to ensure the survival of a postal outlet. In this context, a convenience store could enhance its services by also serving as a postal outlet, for example. According to your study, that would improve the postal services' profitability.

I'd like to mention a case I observed in my region, in Abitibi-Témiscamingue. A firm like SNC-Lavalin is awarded the contract to clear snow from post office boxes just about everywhere in Quebec. This has been the case for the past 10 years, at least in Abitibi-Témiscamingue. However, some mailboxes are not being cleared because the contractor acting as subcontractor has not been paid for nearly two years. Residents are the ones being penalized, as they can't pick up their mail. This impacts both residents and postal employees, such as letter carriers and postmasters.

This is the kind of reality we're experiencing in the regions since we no longer have lively, bustling postal outlets in every village. How can we provide these people with better services and ensure that they have access to their mail?

I'm also thinking of indigenous communities that can't access everything on the Internet because no delivery services are offered right to their homes.

Moreover, there are not enough post office boxes and in many cases, and Canada Post refuses to add any.

This is the kind of highly frustrating situation we face in the regions.

How could we ensure that people on the ground have a greater capacity to receive services and, ultimately, offer quality service to citizens?

[John Anderson]

Thank you very much for the question.

I think we have to ensure that we offer equal services to citizens in small-town and rural Canada. I'm interested in talking particularly about postal banking and other services the post office could offer because we already have that infrastructure. We don't have to create the infrastructure of the post office. It's already there. We have 5,800 postal outlets across Canada. They say it's dropped below 5,800, but let's say it's almost 5,800. That's a lot. I think McDonald's has like, I don't know, 1,600 burger shops in Canada. Canada Post probably has the largest number of retail outlets of anything in Canada or in Quebec—it doesn't matter where in Canada—so we can use those to offer these other services. We don't have to ask, how are we going to do that? Where are we going to put this service? No, we can build up those services and offer them through the post office, which already exists.

That's why I think it's something that we should go ahead with, because we can offer the services and we can see which ones are going to work and which ones are not going to work. We can test them out in different regions and then move on, on that basis.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Anderson.

Mr. Bachrach, go ahead, please.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

A lot of the post offices in Canada are operated under Canada Post's “postmaster-provided” facility model, whereby the postmaster hired by Canada Post has to secure a facility themselves and provide it for Canada Post's use, and Canada Post pays a small stipend in lieu of rent, usually less than $500 per month. The postmaster is required to insure the space, shovel the snow and deliver postal services.

I'm wondering about the compatibility of that model with postal banking, because right now what we're seeing is that the postmasters in these circumstances are very poorly compensated. When one of them passes away or for some reason leaves the position, Canada Post has a very difficult time recruiting new rural postmasters to fill those spots.

Thinking about postal banking, is that also not a rationale to return to the retail outlet model whereby Canada Post operates a post office that's owned by Canada Post, with Canada Post unionized staff, which provides services other than postal services, including postal banking and electric vehicle charging, that kind of thing? Do we need to look more at that model for small communities?

[John Anderson]

Definitely. I think we have to look at delivering equal services. If the model we have in terms of how the postal outlets are run is putting in danger those services, we have to try to correct that. I think that's obviously the case.

People have to be able to get the same kinds of equal services, and we have to make sure that postmasters who are running these services are treated equally. We've already seen the terrible crisis that occurred in the U.K. around that issue in terms of how some people were treated. However, I think that we can do this and make sure that we are funding adequately the delivery of rural services. Also, as I said, postal banking can help that because it can bring in additional revenue, which will allow the post office to have the ability to make sure that rural services are delivered in an equal fashion.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Bachrach.

We'll go to Mr. Brock, and then we'll finish with Mr. Bains.

[Larry Brock, Conservative, Brantford—Brant, ON]

Thank you, Chair.

Thank you, Mr. Anderson, for your attendance and your contribution to this study.

I have a couple of questions. I may not use all of my five minutes, but I'm going to read all the questions out to you and give you as much time as possible for your response.

I'm curious as to how the post office itself would compete with large Canadian banks across the country that already have the infrastructure and the name recognition and are well established. That's one question.

Would the new postal banking service rely on public funding? If the post office were offering loans while it is losing $750 million a year, what funds would it be relying on to fund those loans?

Lastly, how much would it cost to set up the infrastructure required for postal banking?

[John Anderson]

Those are excellent questions.

Certainly, postal banking around the world has been in a situation where the postal banks have competed with traditional private sector banks. In the case of Canada, it's not just the private sector; it's credit unions. If you take Quebec, I think 70% or more of the citizens of Quebec use credit unions as their primary banking source.

There would be competition with existing models, but I think that competition is justified because banks and credit unions, but particularly banks, have reneged on the services they're providing, particularly to rural Canada. You can just google any of the big banks and branch closures and you'll see what towns have been hit by the closure of branches in small-town Canada. It's a huge number on a regular basis. First of all, we need to challenge that, and postal banking is one of the ways of offering those kinds of services.

In the U.K.'s system, you can use your banking card with another bank to take out money at the post office. There are ways of accommodating someone who's a member of another bank, but it does offer a service that is extremely important, and I think we could deliver things.

Regarding the cost of that, in order to get the system running, we would temporarily have to borrow a small amount of money, but not a huge amount, because we already have an infrastructure. We don't have to buy buildings. We don't have to hire staff. We have to train staff and introduce programs slowly to make sure the services are accurate and are working well for the Canadians who would use them, but I think that would be repaid.

We've seen, in general, in terms of postal banking around the world, that it has been profitable. Because many people don't have access to other banking services, they would use those postal banking services. Right now, we've seen the form in which Canada Post was going to start off, which was a partnership with TD. They were going to work with TD to deliver some of the financial services through the post office.

There are different ways of doing it, and I think we can build that situation up to where we are able to offer postal banking services in a profitable manner. It's something that does not demand vast amounts of government money in terms of investment to do those things. We're in a new age of the Internet where a lot of these services can be delivered by trained personnel over the Internet, so it's not something where we have to figure out how we're going to deliver those services. We can teach somebody how to deliver a banking service over the Internet, and they can have contact with somebody in a central office.

We should be using, at the federal level, our trained banking experts in EDC, BDC, Farm Credit Canada, etc. We have this whole banking infrastructure in Canada, which is very large at the federal level and is owned by the federal government. It's not that we don't have anybody who knows what they're doing around banking services; we do.

[Larry Brock, Conservative, Brantford—Brant, ON]

Thank you, sir.

[The Chair, Conservative, Kelly McCauley]

Thank you.

Mr. Bains, go ahead, please.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you, Mr. Anderson, for joining us today and, of course, recognizing the efforts and dedication of our hard-working Canada Post workers.

I'd like to touch upon some parts you may have touched on before. I'd like to ask a little bit about the required hardware, software, security and cybersecurity infrastructure capabilities that you believe you would be able to meet with respect to having a banking institution set up through Canada Post.

If we look at some of the security risks that are associated with the increasing challenges with technology, artificial intelligence, all of these things, we see that the protection of people's information has been compromised in certain corporate companies, such as London Drugs here in British Columbia. There have been some recent concerns around that.

What are your capabilities such that you think you'll be able to make sure that those risks are mitigated?

[John Anderson]

First of all, I would say that, already, Canada Post offices do handle money. They handle cash, give out postal money orders, etc., on a regular basis. Some of them do a lot of work in terms of that part of the business. They were moving toward offering loans through the post office. They had developed certain mechanisms there. I think we can easily rely on our federal banking infrastructure.

As I said, we have the BDC, EDC and Farm Credit Canada, which have expertise in the kind of software that is needed to develop loan programs and the equivalent of mortgage programs, etc. I think we have that expertise, and we can employ the latest technologies that are needed around those issues. That is not something with which we have no experience at the federal level.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Do you feel confident with tapping into the existing safety measures, such as with cybersecurity, into whatever federal programs or technologies are available to easily transition into this sector and what your services would be?

[John Anderson]

We would have to go after the particular measures that are needed in terms of financial transactions. That is a particular area of cybersecurity. As I said, we have expertise at the federal government level.

Postal banking is done in many countries around the world. They have succeeded in doing this, and there have not been any particular issues in terms of postal banking that haven't been found anywhere else. Every so often, there's some issue in terms of private sector banks, but in general, private sector banks are capable of doing this, and so should the post office.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Can you maybe shed light on some of the research you've done and explain the mixed success of postal banking internationally? What models have been very successful? Where have they been introduced and then led to privatization?

[John Anderson]

As I said, most European countries, if you want to start there, have successful postal banking institutions. Some are fairly recent and others have been around for a longer time. Some do not have them, but the majority do.

Of course, we have major countries, such as Japan and China, that have big postal banking institutions. One of Japan's largest banks is the postal bank. Certainly, those companies have been developed using postal staff, retraining them, and adding new people where necessary. I think it is something for which the track record in general is very good.

As I mentioned, some of the banks, like the Japan Post Bank, the French postal bank, and the Chinese one, are among the largest banks in the world.

[The Chair, Conservative, Kelly McCauley]

I'm sorry, Mr. Anderson. Can I get you to just wrap up? We're past our time.

[John Anderson]

I think we do have the capacities to do that. We can find the people and the programs that will make that secure around those issues.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Bains.

Mr. Anderson, thank you for taking the time to come back for a second appearance at OGGO. We appreciate everything.

We'll update the Canada Post report. I'm thinking it'll be maybe a week this Friday. We should probably have it updated by about a week from now. About a week after it is ready, we'll ask for recommendations, and then we'll find a time to actually do the report itself.

Mr. Lemire, you have the floor.