What will it mean for consumers and the wider financial services industry? In theory, it should make banking facilities more readily available, with a large majority of people reportedly living within three miles of a branch.
A big provider of foreign currency for holidaymakers, the Post Office also offers a number of savings, insurance and lending products. As part of the new project it will also offer a 90 per cent loan-to-value (LTV) mortgage product aimed at first-time buyers, and will seek to double the value of its mortgage book in 2010-11.
Ramping up mortgage lending to such an extent is a big ask in the current economic climate, and it will need to offer extremely competitive rates if it is to meet such demanding targets.
In reality, 90 per cent LTV mortgages are available via a number of lenders, and only this week, high street giant HSBC trimmed a further 0.5 points off its market-leading tracker deal for first-time buyers. Equally, consumers shouldn't think that just because there's a government push to drive volume that Post Office mortgages will be any easier to get.
The most popular new products are likely to be the Post Office current account and the weekly budgeting account, which will enable those on low incomes to reduce costs by using direct debits to pay utility bills.
Negotiations are also under way that may allow Royal Bank of Scotland and Santander customers to access their banking via post office counters. This would mean that nigh on 90 per cent of current accounts in the UK would be accessible at a post office.
The product that is likely to be of greatest interest will be the Savings Gateway account, which will be launched later this year for people on lower incomes, with the government aiming to encourage savings by contributing 50p for every 1 saved.
Post Office pricing to date has been quite keen and it features prominently in best-buy tables for personal loans and one-year and two-year fixed-rate bonds.
However, I'm not convinced it will remain competitive across all product areas, or have the capacity and trained staff to deal with current account and mortgage business/queries on top of its existing workload and maintain high standards of service. I hope I'm wrong.
Andrew Hagger is head of communications at Moneynet