Rising postal costs push the need for change

I would imagine most everyone reading this remembers where they were the night before we ushered in the year 2000. The world braced for chaos as midnight approached, waiting for the potential disaster of no water, electricity or who knows what else when the computer systems crashed as the calendar switches over to 2000.

Of course, we all know the Y2K crisis never materialized even though the potential for disaster seemed real enough. Nevertheless, it did cause the country as a whole to take action to minimize the threats it posed and to look for ways to adjust and change technology so as not to face the issue in the future.

I thought of this experience when I was at a recent Major Mailers meeting and a subsequent meeting of the NPPC. If you have been reading the news, you won’t be surprised that the discussion most certainly was around the USPS proposal to raise postage rates – again. This news has certainly caused some panic, particularly with companies whose businesses involve high-volumes of printed mail because it is not by any means a small increase. This time we are talking about an across-the-board increase of 5.9% with 1.6% CPI, a 4.3% exigent and a consumer stamp price of 49 cents. Yes, 5.9%— one of the highest increases in First-class postage in history.

When it comes to the USPS and ways to remain solvent, raising rates seems to be the only solution that the USPS is allowed. We know that the idea of eliminating Saturday delivery wasn’t approved by Congress. Moreover, labor and operation problems are not going away, thanks to some tough Union support and the inability to close postal facilities fast enough. So what is the USPS to do? Raise rates. Now think about this: If any private business was losing volume and revenue, the last thing they would do to solve the problem is raise rates because that solution just doesn’t work.

So what will credit unions want to do facing yet another increase in postage costs? As soon as they can, they should begin to do just what we did under the threat of Y2K, change how they do things. Additionally, rising postal costs and changing postal requirements are two realities of our environment that will cause both the direct mail and transactional mail industries to rethink how we can expand the services we provide. The USPS Office of Inspector General released a study that indicated most of the mail that was going electronic had already migrated that way. I have to disagree. Speed, costs and the continuing advances in technology are certainly reasons to look more closely than ever at how to include robust electronic options in our mix of offerings—and quickly.

Given the increase in postage now—and I can predict more going forward—I believe credit unions should run as fast as they can toward even more electronic options. What forward-thinking credit union executive wouldn’t put money in the budget for software delivery and other alternative ways to eliminate paper when it comes to raising prices again on the delivery of business documents?

Here is what is ironic. Moving to a five-day delivery schedule—eliminating Saturday—would have saved approximately two billion dollars. If the postage rates increase to the amounts listed above, it will reap two billion dollars. The five-day solution would have caused some businesses to readjust schedules to ensure things like compliance; not easy, I know. However, the other is a potential financial drain on businesses of all sizes.

Postmaster General Pat Donahoe continues to ask for some type of financial relief. Since Congress couldn’t pass, or even agree, on a Postal Reform Plan he has no other choice but to ask for a rate increase. Will it hurt business mailers, banks included? You bet. Will it force Congress to do something? Not likely. In fact, this rate increase gets Congress off the hook for another year, making it possible for yet another rate increase next year and more non-action due to the fact that 2014 is an election year. However, it may be the cliff needed to begin a serious migration to electronic delivery.