The Government is to use the troubled Horizon IT project as the backbone of a major package that will be "the dawn of a new era" for the post office network.
Trade and Industry minister Stephen Byers last week announced plans to create a Universal Bank to offer financial services to 3.5 million people who do not have bank accounts.
Other opportunities outlined by Byers include using the post office network as a centre for electronic commerce, including the distribution of goods bought on the Internet and as one-stop shops for government information and transactions.
The Government also wants local post offices to operate as Internet learning and access centres in the future.
Byers accused the Post Office of being slow to modernise, but said many of the new initiatives had been made possible by the Horizon project, which will ensure that every post office in the country is fully automated by summer 2001.
Stuart Sweetman, Post Office group managing director for customer and banking services, said the Government's proposals "are a very welcome step towards a revitalised, modernised network".
But he was cautious about the level of financial support the Government will pledge.
The Post Office last month wrote off £571m on the Pathway project, the predecessor to Horizon, while ICL took a charge of £180m. The project was initially envisaged as a secure network that would automate benefits payments at post offices.
About 8,000 post offices have now been automated under the Horizon project, which is bringing 300 offices on-line each week.
The trial is a partnership with Prepayment Cards, a joint company of ERG, Sema Group UK, Stagecoach Holdings, FirstGroup and National Express Group.
More than 750,000 cards will be issued to concessionary travellers and passengers of the major private transit operators through 800 post offices. If successful the scheme will expand to all 18,500 post offices.