A new report from the United States Postal Service inspector general proposes that the agency offer non-bank financial services, including payday loans. Opinion pieces and blog posts praised this idea as a way for the post office to solve its fiscal woes while reaching a portion of Americans outside the traditional banking system. A Reuters “Great Debate” piece, “Transforming Post Offices into banks”), called the proposal a “win-win.”

These pieces overlook some practical problems, however, and leave numerous questions unanswered about implementation. While government and charitable-sponsored financial services should play a role in consumer lending, they cannot replace market-based solutions.

Notably, the USPS proposal underestimates the challenge of offering consumer financial services in an increasingly competitive marketplace regulated by complex federal and state laws. Without a sizable government subsidy, the report’s suggested interest rate for small-dollar loans would not even cover basic operating expenses.

A number of credit unions, community banks and nonprofit organizations have started similar, artificially low-priced, small-dollar loan programs only to struggle to sustain operations, much less make a profit. This has led many institutions — credit unions in particular — to conclude they cannot viably provide short-term credit, according to research by University of California, Davis Professor Victor Stango.

Local storefront lenders can offer market-competitive prices — with rapidly diversifying portfolios, insights from data on consumer trends and operational efficiencies — to meet the growing demand for short-term loans and other non-bank financial services.