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The government is to promote new financial products and services that will be made available through the Post office, ranging from children's savings to business accounts.
Public consultation will now take place one the plans, which also include the provision of mortgages, requiring investment of up to £1.7bn by 2011.
A current account would also be made accessible from any of the 11, 500 Post Office branches across the UK.
Business secretary Lord Mandelson said that growing financial services would help secure the future of the postal network, which has seen a number of closures in recent years.
Leaflets providing details about the plans and offering customers the chance to provide feedback will be available in all branches of the Post Office in the next 12 weeks.
The Post Office at present already offers a range of financial services, including lending and foreign currency products, savings and insurance.
Lord Mandelson said: "Growing financial services at the Post Office will help secure the future of the network and give people access to a full range of banking products at an institution they trust and value.
"At a time when some banks and financial services companies are seeking to reduce face-to-face contact with customers, the Post Office stands out.
"It offers a trusted brand, and has more branches than the high street banks combined. It is ideally placed to bring banking services back to the heart of people's communities."
The consumer group Consumer Focus welcomed the government's plans.
"The Post Office network is at a crossroads," public services expert Richard Bates said.
"There is a real opportunity here for government to provide a secure future for the network by introducing new banking services."
Campaigners have criticised the government for allowing a foreign bank, and not one of the UK's taxpayer-funded banks, to profit from helping the Post Office offer the new range of financial products.
Pat McFadden, the business minister, defended the decision to stick with the Bank of Ireland by saying the Post Office was already tied into a fixed contract with the bank to offer similar products.
Dods Parliamentary Communications Ltd