Universal Bank to start with only 10,000 customers

The Post Office's "Universal Bank", which is aimed at people with no bank account, will have fewer than 10,000 customers when it opens for business next week, a tiny proportion of the three million currently without access to financial services.

The project, which has been dogged by delays, has again been thwarted by the Government's failure to send out application forms for the accounts until just four days before the accounts go live, on 1 April.

As a result, fewer than 10,000 people will have their Post Office card account up and running on the launch date, even though the Government has been working towards opening the bank for three years and the Post Office's system has been fully operational for several weeks.

The Government developed the idea as a money-saving way to move all state benefits away from the manual system of cash payments through the Post Office network to an electronic transfer of the money into recipients' bank accounts.

A deal has been hammered out between the Government and a consortium of banks to allow this to happen in one of three ways. The 14 million people on benefits can redirect the payment into their existing account, if they have one. Or they can open a more basic account, which have been set up by the major banks. Benefits can be collected either at branches or at a post office. Alternatively, people can open the Post Office's "card account" and access it at the network's 17,500 branches.

The Department for Work and Pensions stressed it is phasing in the Universal Bank gradually. So far, it has only written to 1.3 million of the 6.9 million people who receive child benefit and most of the 125,000 people with a war pension.

The DWP has received responses from about 60,000 people so far saying they would like to open a card account. But because the department will not send out application forms until Thursday, it is unlikely that many will be able to have their benefit paid into the account by 1 April. A DWP spokesperson said: "We are starting off very small. We haven't sent the documents out yet because we needed to trial the service."

Separately, banks also seem unprepared for the advent of electronic benefits payments. Most of them have reported a strong take up of basic accounts, yet virtually none have plans to hire more staff to cope with the increase in people coming into branches to withdraw benefits.

One banker said: "People come into the Post Office on average twice a week to cash their benefit. The banks think they can get these people to use cash machines, but it is not going to work. They need at least 10,000 more staff, otherwise there will be queues around the block."

A spokesperson for HBOS, which controls three quarters of all basic bank accounts, said the bank did not expect a dramatic increase in footfall in branches.