By pledging to slash services and hike stamp prices, Canada Post has set itself on the road to extinction.

It doesn’t have to be that way.

The Crown corporation says it plans to end door-to-door delivery for five million households even as it raises the price of a stamp to $1. It says it has no choice if it is to avoid losing money.

Yet Canada Post is far from being a financial basket case. Its letter mail volumes may be shrinking. But with one exception, it has posted a profit every year since 1994.

It still has more retail outlets across Canada than any other company. It has spent millions upgrading its delivery technology and has started to move into new areas of business.

The Canadian Union of Postal Workers, which represents most employees at the crown corporation, argues that one of those new areas should be banking. It makes a surprisingly strong argument.

I say surprising because Canadians don’t usually associate the post office with banking. But as John Anderson points out, in a research paper published this fall by the Canadian Centre for Policy Alternatives, postal savings banks are money makers world-wide.

New Zealand’s postal banking system, which was re-invigorated just eight years ago, now accounts for 70 per cent of the profit earned by that country’s post office. The comparable figure for Italy is 67 per cent.

France’s postal savings bank accounts for 36 per cent of its postal service’s pre-tax earnings. Britain is privatizing mail delivery. But it is not privatizing its system of post offices and postal savings banks. They’re too lucrative.

Would postal savings banks work here? Would they provide enough revenue to cross-subsidize money-losing mail delivery?

Canada Post’s current management pooh-poohs the idea. But former Canada Post CEO Moya Greene, who is generally regarded as a business superstar (in 2010, the Brits talent-spotted her to head up the Royal Mail), was much more open to the idea.

Speaking to a Senate committee three months before taking up her Royal Mail job, Greene said Canada Post was seriously considering the idea of offering full financial services.

“We . . . need to diversify the revenue stream and be in wholly different businesses than we are today,” she told the committee. “I note, for example, that many postal administrations have made a success of banking.”

She pointed out that Canada Post currently operates a $1 billion money order business and that in many northern communities the local post office already acts as a kind of bank.

In fact, Canada used to have a postal savings bank system. Pierre Trudeau’s Liberal government abolished it in 1969, in part because — given that the chartered banks operated branches almost everywhere — it seemed unnecessary.

But as Anderson notes, the chartered banks are pulling back. Canadian banks now have 1,800 fewer branches country-wide than they did in 1990. Credit unions, too, are scaling back.

Up to 15 per cent of Canadians are estimated to have no bank accounts at all, which leaves them reliant on so-called payday lenders charging interest rates that, in Ontario, can exceed 540 per cent.

Anderson’s point is that there is a role for a national postal savings bank in Canada. Certainly, the chartered banks, which altogether earned $28.6 billion in profits last year, could use the competition.

At base, Canada Post is an operation characterized by high overhead costs. These represent the buildings, equipment and labour needed to operate a coast-to-coast operation. Such overhead costs are both the company’s weakness and its strength.

They are its weakness because they do not fall when revenues drop. It is as expensive to deliver 10 letters to a particular block as it is to deliver 100.

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But they are its strength because they allow for economies of scale. Which is another way of saying that Canada Post, if it had the wit, could use the cross-country structure it already has in place to offer something more.

The union says that this something more could include banking. Don’t dismiss the idea out of hand. Canada Post’s alternative strategy — less service at higher prices — can only result in a death spiral.

Thomas Walkom's column appears Wednesday, Thursday and Saturday.

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