One often hears complaints about the Ukrainian postal service; there are cases of letters failing to reach the addressee, belated newspaper copies, endless lines at post offices — in a word, very bad service. At the same time, the national postal service has been steadily introducing new services, responding to market demands, observing the rules and principles of the market economy. In fact, the possibility of a postal bank is being discussed. In the following interview, Yevhen ZAIATS, acting director general of the Ukrainian state postal enterprise Ukrposhta, comments on this bank, other ideas offered to postal administrators by the market, and whether timely deliveries to subscribers are a principle of the postal service.
Kostiantyn Yefymenko, Minister of Transport and Communications of Ukraine, recently came up with the idea of a postal bank. Could you comment on this idea?
Zaiats: “Postal services across the world have lately been reviewing their financials, and offering their customers a variety of banking services. This is only natural, considering that the banking system and the financial market have increased several times over in recent years. Most banks, however, see their priority in making huge profits, so they are in no hurry to reach distant areas where living standards are considerably lower than in the city. Customers who require basic financial services these days remain unattended and are simply unable to use banks in remote localities.
“Considering that a great many post offices, especially in rural areas, turn out to be unprofitable for want of market size, expanding financial services is an opportunity to increase their productivity and revenues.
“The economic feasibility of a larger assortment of financial services available at the post office is clearly apparent. While meeting the customers’ increasing demand for such services, the post office can further develop and keep pace with the times.
“Considering global practices in expanding postal operators’ financial services in various countries, it seems appropriate to single out three main ways to reach this goal: (a) setting up the Postal Bank; (b) authorizing (licensing) post offices to provide separate financial services; (c) providing financial services under agency contracts with banks and financial institutions.
“An analysis of the performance of postal administrations in various countries doesn’t allow to determine a single way to develop financial services because each country has legislative distinctions that have a direct bearing on the postal operators’ efforts regarding these issues.”
Kostiantyn Yefymenko feels sure that the Postal Bank is Ukrposhta’s future. Do you agree? If so, what are the prospects of this bank? When do you think it will be given the go-ahead upstairs?
Zaiats: “Instituting the Postal Bank sounds like an interesting idea, but Ukraine has substantial legislative restrictions that don’t allow the implementation of such a project at present. Above all, it is forbidden [for a post office] to become a company/business founder. The need to professionalize businesses and adopt a new program to upgrade financial services on a national level is also a problem, as are the considerable budget appropriations for the bank’s authorized capital.
“Ukrposhta offices will be able to offer banking services after receiving a special business status, license, and NBU authorization to open individual deposit accounts and to collect and transport currency values. This will allow them to make extra profits and reduce the cost of hard cash deliveries, making the best use of their own resources (experienced personnel, transport, equipment). With time, and given favorable conditions, the Postal Bank may become the logical finale of the campaign for expanding financial services at the post office.”
Would you please briefly describe Ukrposhta’s latest innovations, like “Your Stamp,” courier delivery, uniform e-ticket, and so on? Do these services justify the customer’s expectations?
Zaiats: “These services are very much in demand. ‘Your Stamp’ is a unique product. Each customer can have his/her photo, company logo or any other image on the coupon of this postage stamp. This is an exclusive service and an original way to promote the company’s image. Before long new designs of ‘Your Stamp’ will be released.
“The uniform e-ticket has a big future, for it secures travel by rail and air to the remotest parts of Ukraine. Its technology will be upgraded in the nearest future to make this service even more convenient, particularly during the Euro 2012 soccer championship finals.
“The Ukrainian courier delivery market has been expanding with each passing year. Given today’s severe competition, Ukrposhta is faced with the task of upgrading technologies and service quality, adding services like monitoring deliveries on the Ukrposhta corporate website, delivery notifications and receipts by phone or SMS.”
When traveling across Ukraine, especially in the Carpathian countryside, you rarely see stores but you can do some shopping at the local post office. Is this an additional line of business at specific offices or a centralized strategy aimed at diversifying services? What are the profit statistics?
Zaiats: “Considering that conventional postal services are constantly on a downward curve in Ukraine and all over the world, Ukrposhta, like other postal operators, is looking for ways to make additional profits by offering other commercial services. Among these services are deliveries of printed matter, brochures, logistic services, sales of lottery tickets, prepaid cell phone and Internet cards, consumer goods, and so on.
“Customers are polled at post offices and places of residence about the assortment of goods on sale, prices, and supply.
“In 2009, proceeds from sales produced 5.4 percent of net profits (less purchasing price).”
Are you maintaining this diverse format? If so, how will you go about it?
Zaiats: “This diverse format means keeping pace with the times. After all, you find it more convenient to send and/or receive mail and do shopping in the same place.
“Ukrposhta experts keep looking for ways to upgrade the services available, to make them more convenient for customers. For example, when sending money, a number of additional services are offered, like sending a message (up to ten words), placing a phone call advising of transfer, sending a recommended or SMS notification of receipt, so the sender knows the exact money order delivery/payment date.
“We’re actively upgrading Ukrposhta’s corporate information system, installing work stations at post offices where our customers can make the best use of the latest information technologies, including email, online money transfers using reliable international transfer systems, adding to or drawing from one’s bank account, mobile operators’ e-vouchers, and so on.”
Are these fresh ideas likely to add to Ukrposhta’s service menu?
Zaiats: “Prospective services include the e-stamp, hybrid mail (downloading files, making and delivering hard copies), online shopping, courier deliveries, payments using the corporate website.”
What will the Ukrainian postal service be like 10 to 15 years from now? Do you foresee cardinal changes?
Zaiats: “We are sure that 10 to 15 years from now Ukrposhta will have become a financially stable, highly efficient and competitive company; that it will offer a range of services in line with international quality standards, while showing dynamic progress in terms of profits, tangibly contributing to the Ukrainian economy.
“Post offices and delivery routes are the cornerstones of Ukrposhta’s effective performance. This national operator has to be credited with what World Postal Union experts recognize as having preserved one of the world’s largest comprehensive postal service networks.
“It should be noted that Ukrposhta’s share of the market, as a national operator, keeps dwindling. Market liberalization has allowed nongovernmental postal operators to become active in the most profitable market segments. This, of course, is having an adverse effect on the national operator’s revenues.
“Due to external and domestic factors, and technological and economic problems, we are becoming locked in a vicious circle. Lacking investment funds (Ukrposhta’s current profitability rate is 0.5-09 percent), this company is lagging behind commercial operators in terms of service quality and market supply. This, in turn, causes Ukrposhta to give up positions on the services market.
“There is a special reform-and-development program entitled ‘Ukrposhta in 2010-14,’ designed to solve the problems holding back the company’s progress. This program allows to act upon UPU recommendations laid down in the Regional Postal Service Development Plan for Eastern European and CIS Countries, the Comprehensive Postal Reform and the Development Plan of Ukraine, with en eye on the requirements of the Postal Service Development Program for 2010-13, adopted by Resolution #672 of the Cabinet of Ministers of Ukraine, on 07.01.09.
“Ukrposhta faces difficult tasks that have to be solved within a tight timeframe, including processor-aided cash transfer systems to be added to the work stations at rural and urban post offices, soft- and hardware upgrades worth a total of 14.2 million hryvnias. Capital investments will amount to more than 75 million hryvnias.
“In order to secure stable mail deliveries and to rejuvenate the vehicle fleet (4,300 motor vehicles with an average service life of 10.2 years), Ukrposhta plans to purchase over 800 vehicles. This will reduce the annual operating costs by some one million hryvnias.
“Processor-aided sorting centers are planned to help us with the processing and delivering of mail, as well as with expanding the range of financial and other services, upgrading working conditions, turning this company into an effective and competitive business entity.
“Also, this soft-hardware-upgrading process will help speed up paperwork in terms of accounting and finance-management reports, as well as personnel qualification.”
We know that the post offices constitute a key factor in the effective performance of any periodicals, especially dailies; it all depends on how quickly the copies can be delivered to subscribers. Timely delivery is a big problem in Ukraine. Any plans for solving it? Could our subscribers expect a fresh copy in their mailbox by 8 a.m.?
Zaiats: “Ukrposhta is a link in a long chain of printing, sorting out and delivering mail and periodicals. Therefore, all the other links have to share the responsibility for timely deliveries. For example, a delay at the print shop can ruin the whole production cycle, subsequently wrecking the delivery schedule.
“Ukrposhta is distributing some 10,000 newspaper and magazine titles, close to 1.2 billion copies a year. We have 42 mainline delivery routes totaling over 35,100 kilometers. Since most periodicals are printed in the big cities, Ukrposhta delivers some 40,000 tons of periodicals each year. Our motor vehicles’ annual mileage registers over one hundred million kilometers.
“Periodicals of national caliber are delivered to subscribers in Kyiv, 21 regional centers, and 13,334 populated areas in the vicinity (44.8 percent of all such areas in Ukraine) on the date of issue. The following day, copies of these periodicals are delivered to the Autonomous Republic of the Crimea, Sevastopol, three regional centers (Donetsk, Luhansk, Uzhhorod), and 11,800 populated areas(39.7 percent). The next day, copies are delivered to 4,608 populated areas (15.5 percent). Subscribers to oblast-raion periodicals are guaranteed delivery on the date of the issue.
“We appreciate the desire of the subscribers to the central periodicals to receive the copy on the date of issue, but there are quite a few factors beyond Ukrposhta’s control, especially the fact that most these editions are printed on a centralized basis, in Kyiv, Lviv, and Kharkiv. Given these conditions, timely deliveries to all subscribers in Ukraine within 24 hours are virtually impossible. Kyiv is 836 km from Luhansk, Lviv is 1,349 km from Luhansk, and our motor vehicles can travel 50 km/h, meaning that the ride with the copies takes between 17 and 27 hours.
“In order to solve the problem of timely deliveries, the editors concerned have been repeatedly offered to set up decentralized print shops — for example, in Lviv, Dnipropetrovsk, Odesa, Donetsk, and Simferopol. If and when they do, Ukrposhta will be prepared and willing to alter our current motor vehicle schedules and routes to make quicker deliveries.
“Also, one must bear in mind the lamentable conditions of roads in Ukraine, especially in the countryside, as well as weather conditions. In fact, bad weather caused timely deliveries to go down by 16.3 times in the first quarter of 2010, compared to the same period in 2009.
“Another reason behind this problem is the fact that various editorial offices use various go-to-bed and copy-sorting-delivery schedules, so that copies actually start being delivered to the subscribers after six p.m.
“It is also true that some editorial offices tend to lag behind their own periodical output schedules. Let me remind you that there are no set copy-delivery standards in developed countries. In the case of Ukrposhta, 85,800 such cases were registered in the first five months of this year, compared to 66,800 such cases last year.
“Ukrposhta consumers are offered the courier delivery option, which means that you get the papers before 8 a.m., whatever regional center you may be residing in.
“Ukrposhta is carefully studying mail delivery practice around the world. In the West, several countries have no schedules for the delivery of major periodicals, for the simple reason that they have their mail (all of it) tossed across the fence or left in the mailbag that same day or the next morning. Mail processing is completed within three workdays, depending on the distance and the peculiarities of the country in question.
“It is also true that the subscribers to journals, not newspapers, in Denmark, Slovenia, Switzerland, and several other countries can pay directly to the editorial office, whereas the deliveries are made by the local post offices.
“In Lithuania, whose territory is almost ten times less than that of Ukraine (with 300 km being the longest distance from the capital city to the state border), the problem of timely mail deliveries is resolved as follows: there are two leading Lithuanian publishing companies; they deliver the copies to the post offices, using their own motor vehicles, whereupon postal workers do the sorting out of the mail and deliver the letters and newspapers to the addressees. Here, too, there is the problem of subscribers demanding that the copies of their newspapers be delivered in the morning, before the start of the working day.
“Needless to say, neither Ukrposhta, nor any alternate business entity in Ukraine would dream of delivering newspapers to subscribers by 8 a.m., anywhere in this country (this was practiced only in the regional centers under the Soviets, when copies of newspapers were delivered by aircraft during the night, to be manually sorted, and then delivered to the housing blocks, using “chartered” [ordered by the KGB] cabbies. In the end, mailwomen and/or [Komsomol-enlisted] young people inserted them in the right mailbox.
“In other words, Ukrposhta is interested — as much as the publishers are — in making quick deliveries. Trust me, we’re doing our best!”
