Postmaster General: Online Bill Pay Eroding Postal Revenues

By Melanie Arter | February 14, 2013 | 4:59 PM EST

U.S. Postal Service (AP Photo)

( U.S. Postal Service Postmaster General and CEO Patrick Donohoe on Wednesday said the increase in people paying their bills online is a “primary cause” of the financial challenges facing the U.S. Postal Service.

“Fortunately, people like to receive hard copy statements and other business correspondence through the mail, but unfortunately for us, they are electing to pay bills online,” Donohoe said in opening remarks before the Senate Homeland Security and Governmental Affairs Committee.

If the player does not load, please check that you are running the latest version of Adobe Flash Player.

“The result is that we have seen sharp declines in first-class mail sent by residential customers, and this is a trend that we think will continue to erode postal revenues,” he said.

Donohoe called the uptick in online bill pay “a primary cause of the Postal Service’s financial challenges.”

The Postal Service announced this week that it will end Saturday mail delivery in August.

It recorded a $15.9 billion loss last year and defaulted on $11.1 billion in payments to the U.S. Treasury, and it is losing $25 million a day, the postmaster testified.

In October 2012, for instance, the Postal Service only had a few days worth of cash on hand to fund operations, compared to most companies, which have two months’ worth available, Donohoe said.

“At one point last October, the postal service had less than four days of cash on hand to fund operations. For an organization the size of the Postal Service, which has revenues of $65 billion and a workforce of 495,000 career employees, this is a razor-thin margin. By way of comparison, most private sector companies usually have about two months of cash on hand,” he said.

Donohoe said the lack of flexibility in the U.S. Postal Service’s business model has prevented it from closing the budget gap.

“The Postal Service must generate roughly $20 billion in cost reduction and revenue generation by the year 2016 to return to financial stability,” he said.