Post Office negotiating with banks for new payment levels for branches

The Post Office is ‘pushing the banks harder’ as it negotiates with them for new payment levels for branches, according to chief executive, Nick Read.

In a speech to partnered retailers on 21 November at the Post Office conference, Read said the ‘challenging negotiations’ for the fourth banking framework were now underway.

He told attendees:  “We will be pushing the banks harder on failed deposits, in recognition of the huge amount of work you perform for your customers impacted by the new money laundering controls.” He added the PO is also ‘looking to ensure a sustainable pricing model for postmasters, the post offices and banks.”

Driving greater revenue for PO franchises was the main theme Read’s speech, though figures for the year to date shared at the conference show a challenging financial year for both branches and the PO. Despite rampant inflation, overall revenue was flat and remuneration for branches was down in the first half of 2023, compared with the same period in 2022, falling from £201 million to £197m. RN understands that improvements in ‘variable’ remuneration were wiped out by a near-20% fall in ‘fixed’ remuneration.

Read promised that his aim is to ‘increase the share of PO income going to you’ and also revealed efficiency saving initiatives designed to make running a PO more profitable. This includes a planned  rollout of ‘self-service devices’ for its ‘busiest branches’ also announced. RN understands self service mails machines had previously been confined to the PO’s centrally owned branches. Read said he is ‘seeking investment in automation’, which also includes the 100 teller cash recyclers now in place at its busiest branches.

While Read announced the PO is to end the ‘occasional improvements’ to branch remuneration in favour of measures announced all at once in its ‘annual strategic reviews’, RN understands from attendees at the meeting that some of these upcoming measures were still revealed at this week’s conference. This includes an ‘Operational Excellence Initiative’ designed to pay branches for performing back-office work correctly.

On new services, the chief executive heralded the rollout of DPD and Evri services in around one in five PO branches last week, and said he expects more carriers to join them soon. Meanwhile with its traditional mails partner Royal Mail, the PO is to introduced Tracked 24 and 48 products. While details of the promised profit share on sales generated through the PO’s new parcels website were not shared at the conference, Read reassured: “You will share in the profits generated, consistent with our approach to be a commercially sustainable franchise.”

The Post Office’s delayed project to replace its Horizon computer system is also approaching the release of the second generation ‘NBIT’ programme. The NFSP recently criticised that no independent store is yet to trial the software, but speaking at the conference, Read said: “it is essential that we get this right by taking the time it needs.’

As the Post Office continues its efforts to win back the stores following the Horizon scandal, there were signs the approach was working. Read reported its recent subpostmaster survey showed ‘been a significant increase in those of you pointing to a valued or equal business relationship with Post Office’.

He concluded: “Although we have much to do, the results indicate that we are listening to, and more importantly, acting on what you have told us needs to change.”