By Julian Bajkowski

Australia Post will need to increasingly expand its business into markets normally serviced by the private sector to remain financially sustainable and continue to provide traditional postal services, its chief executive, Ahmed Fahour, has said.

In an impassioned speech to the Australia Israel Chamber of Commerce in Sydney on Thursday, the former National Australia Bank head cum $2.8 million-a-year mailman warned that traditional snail mail delivery had become a “$400 million revenue” hole and that parcel deliveries and digital services would now be the financial lifeblood of the government-owned monopoly.

The radical diversification of Post’s services into new revenue streams, usually already serviced by the private sector, is a key imperative for the government as it attempts to offset the massive infrastructure and labour costs of providing traditional mail services where demand is dwindling.

Mr Fahour said that it was now his ambition “to build a sustainable communications business” and added that Australia Post’s mail deliveries had peaked in 2008. Since then it had delivered 1 billion fewer mail items, he said.

A key element of the bid to put Australia Post on a sustainable long-term footing has been the creation of its so-called digital mailbox which, when it works, is supposed to give consumers a secure online facility through which they can both receive correspondence and make payments and other transactions.

“If you are thinking of the equivalent in the physical world, it is effectively your letter box, your filing cabinet and your bank account but seamlessly combined in a secure online environment,” Mr Fahour said.

Providing secure transactions and bill presentation services from the same facility is an area of appeal not just to Post but other commercial service providers because it offers the potential to rake in far bigger margins from transactions than traditional payments processing that has become highly commoditised.

This is because digital mailbox providers can offer billers and traditional bulk mail users huge cost savings by shifting their customers to electronic bills that can be paid from the essentially same place they are sent to.

While the cost of payment processing to billers may be substantially higher than normal online payment facilities, this is more than offset by the savings billers can realise by not sending paper bills at all.

A further incentive is that because digital post box customers are already verified and the facility securely hosted by the post office, transactions that require sensitive consumer information – like those from government agencies Centrelink are and the Australia Taxation Office   are meant to be far more secure.

At least that’s the theory.

Although the digital post box is being marketed as a new frontier for Australia Post, in reality represents the mail juggernaut’s attempt to get online services right after its prior bill online payments died without fanfare after it was shunned by consumers.

Launched with enormous hype in 2000, the online payments portal of the POSTbillpay service proved so unpopular that in 2007 the internet side of the service was canned.

The closure effectively handed bank-owned provider BPay a monopoly in a market where transaction values are now well in excess of $120 billion a year.

It is not yet clear what Post will differently this time, however Mr Fahour said that the new business would continue to use the “sender pays” model rather than charging customers for access.

Meanwhile, the Post’s parcels business has continued to boom thanks to internet shopping.

Mr Fahour said that on the research available to him, online spending in Australia would maintain “double digit” growth through to 2020 with good propects for domestic parcels.

“Three out of four items purchased by Australians online are purchased on domestic websites despite all of the rhetoric about international,” Mr Fahour said.

These merchants were predominantly small to medium sized businessand were the “engine room for the domestic e-commerce market,” he said.

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