Securing the future of postal services in a world governed by technology

A few months ago, the South African Post Office (SAPO) became one of the first SOEs in South Africa to be placed under provisional liquidation after a request from its creditors, who were unconvinced that the entity would be able to honour their debt payments. Postal services around the world faced similar questions.

This caused significant uproar in the country as the SAPO is not only a postal service but also a lifeline for many citizens to receive their pensions and their social grant payments. This is especially true for people who live in rural areas or smaller towns in South Africa that have one main street, a service station and a convenience store. Following this concern, the SAPO avoided final liquidation and was instead placed into business rescue.

The trials and tribulations of the SAPO are not surprising; postal service models worldwide have been impacted by digitisation and have faced their own identity crisis trying to find a place in a world where the technology juggernaut keeps gaining momentum.

In this article, we will look at some of the challenges that postal services around the world are facing and how they have adapted their operating models to deal with this disruption.

Challenges and shortcomings

A study by the US Postal Service in 2011 said that the company would be facing the following challenges by 2020:

• there has been a progressive shift in communications moving from the physical to the digital. With every new technology, the speed and scope of communications have increased;
• businesses and governments are looking to move not only communications but also transactions to the digital world;
• the digitization of bill presentment and payments (to varying degrees of adoption) is becoming mainstream as more households, including seniors, and people of varying income levels, are adopting the trend;
• control is shifting from the sender to the receiver, giving them greater choice in what, when, and how they receive communications;
• the internet has evolved from mass broadcast media to personalized conversations, hastened by the growth of social media sites;
• traditional players in print media (magazines and newspapers) have not disappeared but are rapidly shifting their focus to online content; and
• digital technologies have facilitated global commerce, allowing businesses to market and, together with parcel delivery services, fulfil orders across borders.  

The US response

At the end of the document, the US Postal Service painted a picture of what the postal service in a digitised age should look like.

The document points out that the Postal Service must identify elements of the new economy that are best delivered by an impartial intermediary that has a mandate to provide agenda-free services to citizens — and then invest appropriately to position itself to be this intermediary: a de facto national service provider. Corporations may be more agile and have proven innovation processes to develop a digital platform offering identity authentication, security management, universal communications delivery, or integrated billing and payments. But the Postal Service, while limited due to size and historical business models, has the advantage of being a trusted intermediary. Together with the private sector, it could create game-changing services. The ability to learn from and work across the private and public sectors is crucial for the Postal Service to continue to be a “platform provider,” bridging the physical and digital worlds and closing the gaps that are currently preventing a fully digital economy.

The document adds that some essential gaps do exist in the digital era that postal operators may be able to fill, leveraging their strong trusted brand, reach, and scope of service. Some of these applications, such as e-commerce facilitation, trusted third-party identity certification, location-based services, mobile marketing, and secure e-mail, already exist in the marketplace, but many do not adequately meet the needs of all users. Working with other government agencies, leading Internet service providers, and Internet intermediaries, the Postal Service may have the opportunity to set a new direction that could fill such “gaps” in the marketplace and lead the next expansion of the digital age.

The Canadian Response

The US Postal Service document points out that, in 2010, Canada launched a digital economy strategy to drive the adoption of new technology and encourage innovation while protecting the rights of Canadians through the strengthening of intellectual property and copyright laws. Policies and programs could be adjusted, where appropriate, to maximize Canadian success in the digital economy. Additionally, the public sector was requested to lead by example as the model users of digital technologies.

Canada Post embraced the government’s strategy in transitioning to digital. It introduced a Comparison Shopper portal that will give Canadian consumers access to a wealth of retailers and products across Canada and the United States while simplifying the online shopping experience. Consumers will benefit from being able to research and compare the most current prices and features and make purchases from a much broader spectrum of retailers than previously possible, all at a simple price that includes taxes, shipping, and other cross-border fees. Additionally, Canada Post’s Border free e-commerce and cross-border delivery platform provides a hosted check-out service for US retailers to improve their international customer experience – specifically for Canadian customers.

The US Postal Service document adds that Canada Post offers a free bill presentation service called epost, where consumers can add, pay, view, and manage over 200 types of bills and other documents such as phone, water, cable, and credit cards, all online. An epost mailbox is a secure, Internet-based virtual “Inbox” where users can receive, add, pay, print, and manage bills and other important financial documents. Epost is closely integrated with the major online banking websites in Canada. If a user has signed up to view billing statements electronically via an online banking website, then they are automatically signed up with epost. Canada Post is currently developing plans for epost 2.0, an extension of the existing service to become an integrated multi-channel communication solution to help address the erosion of physical mail and resolve consumer and business problems with the electronic channel in Canada.

The UK response

In response to the digital threat, the Department for Business Innovation & Skills (in the UK) drafted a policy document which outlined what the future of the postal service in the UK should look like and the support it would receive from the UK Government.

The document points out that, to compete effectively in today’s fast-changing retail environment, the Post Office network needs to change and its renewal must be driven by what customers really want. It needs to offer greater convenience through longer opening hours, quicker service and high retail standards in well-positioned and readily accessible locations.

It will also be essential that modernisation can create a sustainable financial future for Post Office Ltd, sub postmasters, and other post office agents, and one in which they can use their skills and experience to realise the potential of the network. To ensure this, the current economics, high legacy costs and lack of flexibility that exist within the current network structure must be addressed. 

The document adds that Post offices are a natural place for citizens to access face-to-face government services such as identity verification. They can also play an important role in supporting the growth of e-government. By enabling and supporting the move to get more people online.

An important part of the future sustainability of the Post Office will be the continued growth of revenue from financial services. With over two million customers, the Post Office is one of the fastest-growing providers of personal financial services in the UK. It offers a wide range of financial services including personal loans, credit cards, insurance and savings products.

Citizen Centic model for service delivery

As pointed out earlier, the SAPO has been placed into business rescue and not liquidation as the SAPO is simply to big to fail. Now we just have to figure out what the ideal model for the SAPO is.   

The SAPO shares a lot of similarities with the UK Postal system. According to the Department for Business Innovation & Skills policy document, 93% of the total population (and 99% of those living in towns and cities) live within one mile of a post office. And for many rural communities, the post office is the only retail outlet. But will the SAPO follow the same path as that in the UK?

The Post Office is not SAA or SA Express. It is a unique provider of services to metropolitan and under-serviced areas. It is a financial and commercial lifeline to many of South Africa’s poorest communities. These elements must survive in any restructuring effort.

I have shared my thoughts before on the concept of the radical reorganisation of businesses in business rescue, it is particularly appropriate in a large group reorganisation where the market focus of the business needs a radical repositioning. The causes of the financial distress in these instances are market-related and not just the result of a failure by management to respond to industry changes. The SAPO has a proposal to turnaround the business; however, it has never found common ground with National Treasury and remains unfunded.

Perhaps the question starts with a proper assessment of the citizen needs in a digital age, including financial and communication services. The next step is to radically reorganise how this can be achieved. Obvious impacts include all identification processes managed by the Department of Home Affairs, the delivery of pensions and grants managed through the Social Services Agency, vehicle licensing and property registration and rates and taxes would follow.

Given the bottlenecks in these systems and processes, implementation would be a major challenge and take a long period of time. However, it would ultimately deliver a cost-effective one-stop shop for South African Citizens to easily access these essential services.

Given the vacancies in the Postal Service, Government departments, and local municipalities, such a reorganisation does not necessarily mean a reduction in employment but creating a streamlined entity that can provide good service delivery.  

The SAPO turnaround must be the outcome of government policy initiatives, it simply cannot be resolved through a business rescue plan or liquidation.  And make no mistake, this is going to be a massive undertaking. It might be an interesting exercise to propose what the Canadians have done to their own service or follow the USA approach of licencing. South Africa attempted this when it tried to deal with Telecoms deregulation through Under-Serviced Area License (USAL) regimes.

Perhaps Cabinet and the reorganisation of Government departments promised by the ANC would inform this debate. Reducing the number of Government departments and Ministers as part of the leaner public services is inexorably linked to sorting out service delivery. It will also influence the future role of the Post Office as a citizen-centric service provider for all South Africans, particularly those stuck in rural and largely under-serviced areas.

Robin Nicholson is the Director of Corporate-911 and is a Senior Business Rescue Practitioner