Post Office makes no profit from banking services MPs told

In a hearing with the Treasury Select Committee on consumer access to financial services, the Post Office told MPs it is holding talks with banks in an effort to turn around the performance of the service.

This comes despite the Post Office processing 130 million transactions last year for cash withdrawals and deposits.

The Post Office has committed to offering banking services through every one of its 11,500 branches across the UK as a way to offset the swathes of bank branch closures in recent years.

Lloyds Banking Group told the Committee it has shut 23% of its network, while the industry as a whole has closed about 30%.

Committee chair Nicky Morgan said the Government was “effectively subsidising banks” by having to invest in the Post Office to pick up the slack.

Post Office banking director Martin Kearsley said the group was facing a surge in cash-handling costs as 50,000 postmasters are also forced to count cash on a greater scale as consumers and small businesses increasingly pay in at local branches.

Asked if the service was profitable, he said: “Not currently. We are in discussions with banks to change that position.”

Pressed on why the service is loss-making, he added: “If you put the entire cost of supporting our cash infrastructure related to the banking agreement that we’ve got, it is not profitable.”

Tom Blomfield, CEO of challenger bank Monzo, revealed that the group was in talks with the Post Office to offer transactions through its branches.

This would offer customers a service to pay in cash, for a small fee Mr Blomfield confirmed adding: “for the vast majority of other services, our customers prefer to use a mobile app which is open 24 hours a day.”

It comes after rival Starling Bank recently announced a partnership with the Post Office for cash deposits and withdrawals.

When questioned by MPs on the increasing number of IT failures in the banking industry, Mr Kearsley said the Post Office was ensuring it had enough cash on hand to act as the “last line of defence”.

The Post Office is “actively planning” to have more cash available in its network to support banks in the case of IT meltdowns, acting as a “human ATM”, he added.