NFSP Conference 12 May 2004

1
Postal Orders a Physical Presence in a Digital
WorldIain GilbertSenior Product Manager
2
Postal Orders A Brief History

• Postal Orders are 125 years old this year
• Launched in 1881 as a solution to the problem of
  sending small payments by post
• Not Negotiable added in 1892
• Security counterfoil added in 1903

3
Postal Orders A Brief History

• By Edward VIIs reign forty one denominations
  were on sale
• Used widely in everyday life
• Used temporarily as legal tender in the early
  years of each war
• Special commemorative issues produced for the
  Silver Jubilee in 1935 and HM The Queens Golden
  Jubilee in 2003

4
Postal Orders A Brief History

• 1920 1960 seen as the heyday of the postal
  order
• Early 60s, increased use of cheques signalled a
  decline
• Inflation hasnt helped
• Sales have been relatively flat for a number of
  years

5
Postal Orders Overseas

• 26 countries can issue and pay postal orders
• A further 21 countries can pay postal orders, but
  not issue
• Distribution reflects colonial heritage
• Great for sending low value gifts abroad

6
Postal Orders The Current Product

• Much the same as earlier versions
• Available denominations reduced to thirteen (!)
• Can be bought and cashed in any Post Office
  branch
• Circa 29 million sales each year

7
Who Uses Them and What For?

• Mix of C2DE male and female
• Predominately unbanked
• Single parent living in rented accommodation
• Used as a traditional payment vehicle
• Used for giving money
• A number used in prisons

8
Charitable giving

• Recent events demonstrated public lack of
  knowledge around Gift Aid
• Postal orders have declaration on the reverse
• Complete the declaration and enhance the donation

9
Customer Benefits

• Cant be stopped
• As good as cash
• Provides anonymity
• Available from 15,000 outlets
• Clear evidence that a new group of customers is
  using postal orders for on line purchases

10
Why do small traders like postal orders?

• Not technology dependant
• Fee free
• Guaranteed payment
• No fraud risk

11
Relevance to the Electronic Age

• For example, if you are in the UK, paying by
  personal cheque adds about seven to 10 days to
  the normal delivery time. www.adeptscientific
  .co.uk
• Please write your cheque guarantee number and
  card expiry date on the back of the cheque.The
  goods will be despatched as soon as the cheque
  clears. This can take up to five working days,
  whereas a postal order can be cashed straight
  away www.jwl.co.uk
• Ebay Chatline Quotes
• done and dusted with no problems. the fasted no
  paypal payment ever, better than cheques because
  they dont bounce.
• How they work If they're uncrossed you just cash
  them at the post office. If your name is written
  at the top and they are crossed (which is safer
  for the buyer) you have to pay them into your
  bank account. But they cannot be cancelled either
  way.
• Postal orders are great, as good as cash.
• Please write your cheque guarantee number and
  card expiry date on the back of the cheque. The
  goods will be dispatched as soon as the cheque
  clears. This can take up to 5 working days
  whereas a postal order can be cashed straight
  away.

12
Warts and All

• Cumbersome to sell in current form
• Difficult for banks and large merchants to handle
• Vulnerable to forgery
• Supported by obsolete and out of date processes

13
Postal Orders the Future

• Income from postal orders is significant and
  needs to be protected
• New propositions are difficult to
  develop/implement
• Non APACS standard is limiting
• Untapped potential in new markets

14
Postal Orders the Future

• Significant Horizon development
• Will automate the existing postal order product
• Will open the door to new markets

15
Summary

• The product is steeped in tradition, and still
  sells significantly
• If left alone, it will decline over time
• Post Office Ltd is making significant investment
  in automating the processes
• The investment will open the door to new product
  opportunities and provide the platform for
  continued development