Recommendation Recap

As the Task Force worked with the Postal Service to advance its recommendations, members developed a set of principles upon which payment-system enhancement should be constructed in order to realize appropriate levels of value for customers. When the Postal Service presented a proposal to develop a system called PostalOne!® incorporating Web-based scaleable technology, the Task Force immediately offered encouragement, support and feedback on how the new system might best serve the mailing industry.

“Single-source access and transaction tracking are keys to making it easier for mailers like ourselves
to use the channel,” said Gary Mulloy, Chairman and CEO of ADVO. “With ease, there will come productivity and growth. When PostalOne! is fully functional, this aspect of the customer relationship between the permit holder and the Postal Service will have been fundamentally changed for the better.”

• New account management functions, including a core permit function that creates a single
national numbered permit account for multi-site mailers.

• New acceptance and processing tools, including streamlined verification.

• Enhanced postage payment, with expanded Centralized Account Processing System (CAPS)
participation and a single corporate account.

• Electronic access through a single business mailer portal, with consolidated payment reporting.

€ Better interface with postal operations, allowing for improved mail flow management and forecasting, and service measurement.

The Task Force supports the Postal Service plan to build and release the system’s modules incrementally, to ensure that it can be adapted to any future policy or procedure changes and to minimize disruption for postal clerks, who will also be managing legacy permit systems. PostalOne!’s initial target customers are mailers entering at Detached Mail Units (DMU), and the small mailer doing multiple mailings at Business Mail Entry Units (BMEU).

Deferred Payment Options. Task Force members asked the Postal Service to join with them in an investigation of the feasibility of revising pre-payment requirements to allow mailers use of financial instruments such as surety bonds, letters of credit, or equalized payments. Such options, some Task Force members felt, could enhance competitiveness and offer customers greater payment flexibility.

The Postal Service revisited the prospective costs and benefits associated with offering credit terms. Extensive analysis showed that deferred payment is breakeven at best. Therefore, it is likely to constitute suboptimal use of limited Postal Service capital resources. “While deferred payment does respond to preferences communicated by certain customers, and may increase market share, the financial analysis indicates that it is likely a breakeven scenario at best. At worst, the Postal Service could end up deploying scarce capital resources in unprofitable fashion,” Postal Service Treasurer Robert Pedersen told the Task Force.

Surety Bonds, Letters of Credit, Equalized Payments. The MITF proposed that financial instruments such as surety bonds, letters of credit, or equalized payments, could be utilized in the future to enhance competitiveness and offer customers greater payment flexibility. The Postal Service concluded that financial instruments such as surety bonds and letters of credit are not generally accepted forms of payment, only a contractual obligation to pay. As such, they do not satisfy the prepayment of postage obligation.

Pin-Based Debit Cards. Currently, one payment method has been approved for proof-of-concept testing by the Postal Service. In this test, the Postal Service will accept a PIN-based debit card, which would be used to pay postage at selected large Business Mail Entry Unit pilot sites. PIN-based debit cards are a safe, affordable, secure alternative to cash, and can be used for both bulk mail payments and trust fund deposits. When implemented, the test will include business mailers who already use PIN-based debit cards for purchasing.

Third-Party Financial Intermediaries. Two other proof-of-concept tests were proposed by the subcommittee. Both tests involved third-party financial intermediaries that would be enrolled in CAPS. Currently, participation in CAPS is restricted to businesses that purchase at least $50,000 in postal services annually and mail from at least three permit locations. One test was to focus on Business Reply Mail (BRM) for mailers too small to be a CAPS participant. In this test, CAPS-eligible third parties could contract with smaller mailers to allow them to access the third party’s debit account, improving the performance of the smaller mailers’ BRM programs by eliminating any chance that those mailers might not have sufficient funds to cover their BRM replies. When PostalOne! is deployed, the restriction for participation in CAPS will be lifted and the need for
a third-party intermediary work-around will no longer be necessary.

A second proposal considered would allow third-party intermediaries selected by CAPS-enrolled mailers to offer those mailers credit terms, with the Postal Service debiting the third parties for the mailers’ postage. The Postal Service approached a majority of its relationship banks about participating in this test. After these discussions, the Postal Service concluded that the appropriate third-party relationship should be between mailers and their own banking institutions.

The Task Force Steering Committee asked the Postal Service to revisit third-party facilitation from the perspective of ease of use for the customer, rather than lowest cost of mailing. Customers might be willing to pay for the convenience of deferred payment, which would allow the Postal Service to avoid absorbing financing costs, the Task Force suggested. The proposals, if developed with third-party sources, would be third-party facilitation of payment rather than credit. The Postal Service is currently exploring this recommendation.