Almost half of London's post offices will close by the end of 2004, according to the London Assembly.
Post Offices are the "lifeblood" of communities
A report by its public services committee blames the switching of benefits and pension payments direct to bank accounts for hastening closures.
These changes could threaten up to 500 of the city's post offices, suggests the report.
A government report said too many post offices were competing for too little business.
In November 2000, the Post Office started the Urban Reinvention Programme, which sought to restructure the company by closing a third of its 9,000 urban branches and modernising some of the remaining ones.
But the assembly's report says: "The closure of a high street post office is not a decision that should be taken lightly as this is one of the stepping-stones that can lead to the decline of the high street."
The report also suggests the possibility of allowing post offices to sell Travelcards and receive congestion charge payments as a way of boosting business.