The 11,500-branch-strong UK post
office says it is interested in expanding the range of retail
financial services products it sells, especially mortgages. It
already has an established joint venture with Bank of Ireland
though any further expansion could represent significant
competition for the country’s banks, writes Dan

The managing director of the UK’s postal
service has said that the organisation plans to extend its
financial services reach both this year and into 2010, citing a
return to a climate of traditional retail banking as one in which
the UK’s postal service could flourish.

Alan Cook told the UK Parliament’s Business
Select Committee on 21 April that the Post Office is looking to
launch a current account service in 2010 – one that would be
available to customers across every one of its 11,500 branches.

Cook also suggested that a trial range of
mortgages, launched in September 2007 at selected branches and
online, would be expanded and extended across the country’s 370
larger Post Office branches later this year.

Plans to offer home loans would focus on the
Crown post offices, which do not rely as heavily on the typical
Post Office branch layout of serving customers from behind a sheet
of glass.

The comments, made by Cook as part of a
parliamentary discussion of the forthcoming part privatisation of
Post Office owner Royal Mail, come as the latest development in a
saga which has also seen the creation of a coalition of pressure
groups, charities and other organisations aimed at pushing for a
national UK Post Bank in keeping with the kind of savings
institution seen in France, Germany, Italy and further afield
(see table).

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But Cook’s statements seem unlikely to wholly
satisfy such groups. The Post Office sees its expanded service as
an extension of the existing 50-50 joint venture with Bank of
Ireland through which its current range of financial services are

A spokeswoman for the Post Office told
RBI that it was too early to say whether the launch of
current accounts, and associated debit and credit cards, would
involve the establishment of a ‘Post Bank’ brand for the first

The involvement of Bank of Ireland is
potentially problematic for the Post Office: the prevailing
sentiment is for a Post Bank to be government-owned and
government-funded, in keeping with public suspicion of a commercial
banking sector that has crumbled over the past 18 months. Bank of
Ireland, which has itself had to be bailed out by the Irish
government, is unlikely to be seen as the necessary saviour of the
UK banking industry.

Dwindling fortunes of some key

The move is another sign in the UK
that non-bank competitors are prepared to step in to fill the void
created by the dwindling fortunes of key players such as Royal Bank
of Scotland and Lloyds Banking Group. Earlier in April, UK
supermarket chain Tesco announced that it will open 30 bank
branches in its stores by the end of the year (see RBI

Cook said that the current account programme
would be “no different to what we offer for other high street
banks”, referring to the system by which the Post Office allows
customers of major UK institutions to withdraw or deposit cash and
cheques at Post Office branches.

The spokeswoman told RBI that the
Post Office’s existing mortgage trial was “going very well”, and
had witnessed strong take-up levels. “We definitely see ourselves
in the market with all the other UK providers. We have previously
been offering very good rates, and are continuing to offer very
good rates, and have one of the lowest arrangement fees on the
market,” she said.

But a further roll-out of mortgage products
amid an economic climate that continues to sour could also open up
the group, traditionally seen as a community institution, to less
benign relationships with hard-up customers.

“We have got the appropriate checks and
processes in place to ensure we can manage any customers who have
difficulty with repayments,” the spokeswoman said, adding that the
Post Office had also signed up to a government initiative to
support struggling homeowners.

Postal banks across Europe have reported
increased levels of interest amid the current financial crisis as
retail consumers look for perceived safe havens. France’s La Banque
Postale, fresh from a 15.1 percent rise in outstanding volumes at
its own fledging mortgage business, is similarly planning to launch
“a new type of retail banking” in France (see country survey,
RBI 610
). Swiss Post is pushing hard for a banking licence
that would enable it to offer loans to customers.

Others, such as Germany’s Deutsche Postbank
and Italy’s BancoPosta, have long been active in the financial
services sector and are well-established. Deutsche Postbank has 4.9
million ‘core’ customers while BancoPosta has 5.3 million current
account holders and says it is now close to issuing its
10-millionth payment card.


Networks of selected postal



Nos of


Post Office Savings Bank



China Post






La Banque Postale






Deutsche Postbank



Banco Postal



Bank Pocztowy


South Korea

Korea Post



Swiss PostFinance






Banque de la Poste


New Zealand



Source: RBI