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With a vast branch network already in place, offering full banking services should help boost revenues

Hongkong Post is missing a golden opportunity to generate increased revenues from its big branch network, play a small but instructive role in the global campaign against money laundering and at the same time play the good Samaritan to migrant Philippine workers in Hong Kong.

It could achieve all three of these objectives - not to mention  help balance the government budget and fire a competitive shot across the bows of Hong Kong banks - by offering low-cost savings accounts to small depositors.

Small loans could follow, generating further revenues and freeing Hong Kong's most vulnerable community from the clutches of loan sharks.

Why not?

Precedents for far more adventurous forays by post offices into the provision of  banking services are in place around the world, not least on the mainland, where China Post is being restructured into a full-service bank that would become the country's fifth-largest financial institution after the Big Four state-owned banks.

In recognition of the sheer scale and boldness of that move, officials from Japan Post, also  undergoing a major restructuring, passed through Hong Kong last month on their way to exchange views with their counterparts in China on how best to manage hiving off its savings services into one of four new operating units.

Kiwibank, a banking arm of New Zealand Post launched in November 2001, reported an operating surplus of NZ$4.9 million ($27.3 million) for the nine months to March.  Insubstantial, to be sure, and representing a return of just 0.4 per cent on modest average assets of NZ$1.64 billion.

As a start-up enterprise, the bank also required seed capital from the government and, to date, some NZ$140 million of taxpayers' money has been invested in the operation.

But Kiwibank's asset growth over the  past 12 months was 47 per cent, and a low-cost alternative to commercial banks is  proving  attractive to customers, if not banking rivals, who target  higher operating returns. Hang Seng Bank, by contrast, manages returns of 2.17 per cent.

The infrastructure is in place for a similar move by Hongkong Post and with some 109 fixed outlets and a mobile service that takes its services to rural locations where banks are rarer than hen's teeth, its  branch network   is on par with the biggest  banks in the territory, rivalling those of Bank of East Asia (110 branches), and Hang Seng (92 branches).

Hongkong Post has already taken the first steps towards putting those postal branches to work  as banking  outlets,  with apparently encouraging results.

In November last year it  tied up with Western Union to pilot cross-border money remittance services from 10 branches. Neither Hongkong Post nor Western Union is willing to say precisely how successful the experiment has been, although each has described the experience as 'encouraging'.

Naysayers may point to the fact that Hong Kong is already over-banked, indeed the most heavily over-banked centre in the world based on branches per capita. Many would bristle at the idea of placing a government entity into direct competition with the private sector.

But postal banking would target a narrow segment of the community that has been actively driven away from the formal banking sector.

When Hong Kong scrapped the last remnants of interest rate regulation in 2001, lenders introduced a tiered-rate structure to penalise small customers who contributed nothing to revenues and were a net cost to branches. They set minimum average balances below which no interest was paid and services charges applied. Domestic servants and other low-income people who could not  maintain $5,000 in savings found themselves paying $50 a month just to keep their accounts open.

So who plays banker to this  disenfranchised class, if not Hongkong Post?

Postal banking could also help address the issue of money laundering.

Hongkong Post's partner in the money remittance business, Western Union, presently issues a 'Gold Card' to customers that captures personal data. No particularly rigorous ID checks are conducted when issuing the card, which was aimed  at accelerating transaction times.

Western Union calls for an ID check whenever a customer seeks to send more than $7,500 (the Hong Kong government, in one of the most lax policing requirements,  requires such an ID check only for sums of more than  $20,000).

But upgrading these cards into more robust ID documents would not be a particularly costly exercise and one which a government committed to doing its share towards combating money laundering should be more than willing to share.

Sadly, inquiries to Hongkong Post from the South China Morning Post this week proved discouraging. The Hong Kong banking market was mature, legislative amendments would be required, a solid business case would have to be argued.

The list of challenges could no doubt be extended. How about focusing on the opportunities, instead?



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