This guest post is by Piyush Bhatnagar

[Our post on a startup called Outbox launching its new system of mail delivery in San Francisco received a good deal of interest from readers. This is one reader’s response.]

Innovation is the engine of America’s economic growth. Entrepreneurs are coming up with radical new ideas every day, and new startups create new products, services, and business models. Some of these ideas will change the way do things today. So let’s take a look at one such company that is attempting to change the way we think about the mail.

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Outbox launched in San Francisco on Feb 26th, 2013. The company was founded in 2011 in Austin with a goal to provide an alternative to the old system of mail delivery. Outbox’s team of “Unpostmen” will collect your mail three times a week, bring it to a warehouse, digitize it and provide you access to it through web or mobile devices. They will also discard your junk mail, which in my opinion is a huge service in its own right.

Outbox will do all this for a small sum of $5 a month, so you will never have to visit your postal mailbox again. They will also deliver you a package, in a fancy Prius, if you request your original mail from an iPad or smartphone within 30 days on its receipt. After 60 days, your physical mail will be discarded and shredded so you wont have to worry about old mail sitting in some warehouse. Outbox uses strong 512-bit encryption, and prevents digitized mail from falling into the hands of someone other than the intended recipient.

The company has already raised $2.2 million from Floodgate Fund and angel investors, including Peter Thiel. However, there are others in this space who are working on making your physical mailbox obsolete.

I can appreciate the process of innovation and respect anyone who tries to create something new. But Outbox does raise a number of questions as well.

Privacy issues

Despite their innovative take on “old style” mail, one word sums up the problems with Outbox’s approach, and that’s privacy.

Outbox employees will open every mail or package that I receive, and digitize it. According to Outbox’s FAQ, their operations specialists use their custom built machines to open, lay out, and photograph your physical mail. These files are then optimized and processed digitally, and then delivered to your digital account. They also state that all “Unpostmen” –and anyone at Outbox who interfaces with your mail — go through a stronger background check than U.S. Postal Service workers go through, giving the the best trained and highest rated workforce.

Typical mail may include checks, personal information, private communication, legal documents, and many such things. In traditional system, even though USPS/FEDEX/UPS staff handles your mail, it is sealed by the sender and opened only by you.

Identity theft and mail fraud

In Outbox’s model, someone other than the recipient opens every piece of mail. Outbox states that they have strict policy and technical controls in place, including prohibiting employee’s access to critical documents (except in rare cases.) In addition, Outbox states that it is insured up to $1 million against identity theft.

Despite Outbox’s assurances that it is making sure you and your accounts are safe, there is a distinct possibility of identity theft. Just the fact that the mail needs to be opened physically and maintained in a warehouse for up to 60 days provides a window of opportunity to identity thieves and fraudsters. There are liability issues related to someone else opening mail and a problem of accountability. Who is responsible for a lost mail or documents? That is still not clear.

How will Outbox make money?

Outbox is offering the service for $4.99 per month, with no additional fees for delivery or mail volume. Since they will deliver mail through an app or web, there is potential to add digital ads as a new revenue stream. The costs of running this business are surely prohibitive otherwise.

The costs for sorting and digitizing equipment, the warehouse for storage, hiring “unpostmen” as well as other warehouse staff, the vehicles for mail pickup and delivery will quickly add up. It is quite likely that Outbox will be replacing junk snail-mail with its own digitized avatar.

Is this a problem worth solving?

As a fellow entrepreneur, I highly respect the out-of-the-box thinking of the Outbox team and admire their tenacity in coming up with an innovative alternative to the “old style” mail.

The main question that comes to mind is whether this is a problem that needs a solution. Most service providers, banks, electric companies, phone companies, and so on, allow consumers to choose electronic billing. Electronic payments are commonly used alternatives to sending checks by snail-mail. These practices avoids the snail mail altogether and also ensure that only the senders and recipients get to see the contents and no one else.

If you determine that you need an alternative to USPS, is Outbox worth the risk? I am not comfortable with anyone else opening my mail. Are you?

piyush2Piyush Bhatnagar is the Founder and CEO of Authomate Inc., an early-stage security startup. He a seasoned technology executive, entrepreneur and consultant with over 20 years of experience in technology development and management at companies like AT&T and Bank of America. 

Mailbox image via Joe Belanger, Shutterstock