The Canadian Bankers Association says there is "no public policy objective or existing gap in the marketplace'' that would warrant a Crown corporation becoming a retail bank.
In a brief to the federal task force reviewing Canada Post, the bankers association says some proponents of postal banking are "disregarding the facts'' about Canada's highly competitive and accessible financial services sector.
While Canada Post itself has said little about getting into banking, the Canadian Union of Postal Workers has strongly promoted the idea.
Postal services in many other countries, including Brazil, France and Italy, provide banking services, and Canada had such a system from shortly after Confederation until 1969.
Canadian banks have raked in enormous profits while cutting service, closing branches and charging some of the highest banking and automatic-teller fees in the world, the union alleges in an information bulletin published on its website.
The union says while thousands of towns and villages across Canada do not have a bank, many of them have a post office that could provide financial and banking services.
In addition, nearly two million Canadians in urban and rural areas "desperately need an alternative to predatory payday lenders,'' the union says. "A postal bank could be that alternative.''
Finally, postal banking could help Canada Post make money as traditional letter mail dwindles, boost its ability to provide public delivery service and create decent jobs in communities throughout Canada, the union says.
The bankers association denies it is failing to meet the needs of Canadians, questions the notion postal banking would help those who depend on payday loans and cautions that getting involved in retail financial services "should not be taken lightly.''
It is up to Canada Post to decide what lines of business to pursue, said Maura Drew-Lytle, a spokeswoman for the bankers association. But she added: "There have been a number of arguments made in favour of postal banking and we wanted to present some facts to address those claims as the task force does its review.''
Canada Post had no immediate comment on the bankers association's submission.
In the brief, the association says 99 per cent of Canadians have an account with a financial institution.
While only 13 per cent of Canadians visit branches for daily banking, banks have maintained extensive branch networks for those clients who want in-person advice about investments, mortgages and retirement savings, the association adds.
The number of bank branches increased to 6,348 in 2014 from 6,151 in 2010, and many have hours during evenings and weekends, the brief adds. Most banks also offer online and mobile banking, allowing customers access to services round-the-clock.
Research on payday lending locations has found that more than 80 per cent are located within one kilometre of a bank, the bankers association says.
"While those who use payday lenders do so for a variety of reasons, banks believe that, for those who use payday lenders to make ends meet, providing additional credit to someone who has already exhausted other credit options is not helpful to that person,'' the submission says.
"Banks would rather help with tools and advice such as loan consolidation, money management advice or referral to a not-for-profit credit counselling agency.''
The association argues Canada's banks are a model of stability due to prudence and effective regulation and supervision. It is "critically important'' for financial service providers to have the appropriate expertise, processes, systems and robust risk-management practices to protect Canada's financial system, the submission says.
"Because Canada Post is a Crown corporation, taxpayers ultimately bear the risk of its operations.''
Author: Jim Bronskill