Exclusive: ‘Postmodern banking’ – Martin Kearsley, Post Office in “The Fintech Magazine”

The UK Post Office has de facto become the country’s biggest high street bank, acting as proxy for those that can’t maintain a presence there. As it enters a new era in 2020, the retailer’s Banking Director, Martin Kearsley, believes it’s more relevant than ever.

When the Post Office was founded in 1660, as the General Post Office, Charles II was reacquainting himself with the throne, Samuel Pepys was busy scribbling about plagues and fires, and the invention of the steam engine was still more than half a century away.

Four industrial revolutions and nearly four centuries later, the Post Office remains omnipresent: one of the few bastions of the British high street to stubbornly maintain its grip in the face of digital migration.

In fact, its 11,500 branches – more than all UK banks and building societies combined – make the nation’s humble, street-corner public services provider the largest retail network in Europe. 

Today, 93 per cent of the UK’s population lives within a mile of a Post Office branch; contrastingly, 80 per cent of Brits have a bank branch within two miles of their home. 

That’s not to say that the Post Office has had it easy. The majority of mail is now sent electronically, and the majority of services provided by the Post Office are now available online. A recent report from the National Federation of SubPostmasters revealed the extent of the Post Office’s revenue nosedive over the past decade: income from the provision of Government services – like DVLA forms and fishing licences – had plummeted from £576million in 2005 to only £99million in 2018.

With the state-owned Post Office running larger and larger deficits, and cherished town centre branches closing across the country, the Government rushed through the Postal Services Act in 2011. The ruling separated Royal Mail from the Post Office, providing the latter with much-needed space to find new sources of revenue. As the firm’s Banking Director, Martin Kearsley, explains, that’s enabled the Post Office to adopt a hybrid business model, allowing the firm to continue serving millions of UK customers each week. 

“Our model, generally, is now an agency model,” he explains, “whereby most of our branches around the country are effectively running other businesses at the same time, be that a convenience store, a fish and chip shop, a pub – we have Post Offices in almost every type of local business you could imagine.”

This model appears to be what saved the Post Office from suffering a similar fate to Woolworths and Northern Rock. And by renewing its bricks-and-mortar dominance, just as banks were abandoning rural and deprived-urban communities across the UK, a confluence of market forces began nudging the Post Office towards providing banking services on top of its more traditional offerings.

Enter Post Office Money, so-named in 2015 after a decade-long partnership with the Bank of Ireland, during which the Post Office unfurled branded travel cards, loans, mortgages and other financial services used by more than 2.1 million UK customers. This summer, the Post Office also announced the introduction of two new credit cards, partnering this time with Capital One UK, to further broaden its branded financial offerings. 

But the real banking breakthrough came in 2017, when the Post Office reached a negotiated agreement with 29 UK banks – including digital providers like Starling and Tide – that enabled banking customers to carry out basic over-the-counter transactions in Post Office branches. 

Backed by government committees concerned by the emerging last-bank-in-town phenomenon, the industry-wide move was quickly lauded as the ‘biggest expansion in face-to-face banking access in a generation’. Astonishingly, the agreement meant that 99 per cent of personal banking customers, and more than 75 per cent of business customers, could now perform basic banking functions over the counter at their local Post Office – more complex financial services being reserved for bank branches and their trained personnel.

It’s a move Kearsley is understandably proud of: “It means you don’t have to get on a bus, or drive, and find somewhere to park, to go to a bank: you can access the services you need on a daily basis, through a local community hub. 

“It’s a fundamental part of supporting local and rural communities. We offer what is effectively a cash utility service for all banks, in a physical bricks-and-mortar network, giving full access to financial transactional activities that all customers need.”

The ‘proxy bank’ model, on top of the agency model already adopted by the Post Office, offers significant benefits. Many small business owners, for instance, can now deposit earnings on a Sunday or in the evening after most banks’ usual trading hours – and nearly all such traders can stroll to their Post Office branch to do it. 

Meanwhile, the agreement suited all manner of banks, as Kearsley explains.

“Challenger banks are joining us, specifically to give their customers a physical branch network,” he says. “Looking at the mid-tier banks, we’re offering cash services where they simply don’t have the footprint, the spread of branches, to be able to offer, while the largest banks are reducing their branch networks quite dramatically and we’re stepping in to fill that gap, too.”

In a bizarre twist, the Post Office has evolved into the UK’s most comprehensive provider of financial and other services – offering over 170 products and services to consumers of all types. 

However, earlier this year, Kearsley revealed that its groundbreaking agreement with UK banks was not profitable for the Post Office, which resulted, under government supervision, in a new, industry-wide pact, named the Banking Framework Agreement, which took effect on January 8, 2020. This provides postmasters with  broadly three times more remuneration than previously and, despite a wobble, a brief exit, and a U-turn from Barclays, continues to involve the original 29 banks. 

This extra revenue will enable the Post Office to continue playing its crucial role as a banking lifeline – funding the digitisation of services, and introducing new technologies into branches across the UK. For Kearsley, this is about enabling the tech-toting branch experience of the future.

“The ability to offer new and innovative services to customers in non-bank branch locations is dependent on the kind of tech we can deploy,” he explains. “Whether you’re a small business looking to quickly deposit funds, or an elderly customer, an eBayer, or a multi-parcel sender, you all get the same experience at the counter.

“Increasingly, the role of tech is to pull that transaction apart and say, if you want to come in, quickly deposit cash, wave at the postmaster and be gone, you can do it in an automated way. It gives that business customer a better journey, and, equally, offers the customer who requires some extra help at the counter the time and space they need.”

While a 2019 survey conducted by Which? found that only 55 per cent of UK adults are aware they can use the Post Office for banking, the company nonetheless processed 130 million withdrawals, deposits and balance enquiries last year. Technology and training will help boost this number, as will more strategic partnerships, like that announced with Western Union last July, enabling customers to make international digital payments at the Post Office.

“Our aim  is that, whatever account you have, with whatever financial institution, you can access it through a Post Office – which amounts to a huge democratisation of cash,” adds Kearsley.

The Post  Office is currently working as part of the Accenture Fintech Innovation Lab – likely on branded digital services, although the company is yet to announce its digital banking strategy. 

More excitingly, it looks set to become a leading player in the creation of digital identities in the UK. A traditional hub for processing passports and drivers’ licences, it is at the forefront of the Government’s flagship digital identity programme, Verify. This boasts six million registered users and, according to the Post Office’s managing director for identity services, Martin Edwards, has ‘proven the basic concept of digital identity in providing customers with an efficient and secure means to prove who they are’.

A centuries-old organisation learning how to run in the digital age, the Post Office has somewhat surprisingly emerged as the services provider to watch as we enter a new decade of phygital banking. For so long a cornerstone of community life, this treasured UK institution appears ready to forge a future of fundamental financial importance for customers the length and breadth of the UK.


This article was published in The Fintech Magazine: Issue #15, Page 18 & 19.

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Author: Laimis Bilys