Nine months after buying Royal
Bank of Scotland (RBS) out of their UK retail banking joint venture
for £950 million ($1.4 billion), UK supermarket chain Tesco, the
world’s third-largest retailer, has said it will open bank branches
in 30 of its British stores by the end of 2009 as part of plans to
compete head-on with established UK retail

Tesco Personal Finance (TPF), the RBS
joint venture set up in 1997, is already firmly established in the
UK, with six million customers and 28 retail banking products
(see RBI 597). While
distribution has to date mainly been via in-store leaflets and
online – TPF sells 59 percent of its products over the internet –
the roll out of full-service bank branches marks a step-up in the
retailer’s plans.

TPF has been testing an in-store branch in
Scotland for three years, and says it will use its vast knowledge
of retailing to build a superior banking franchise. Unlike
Barclays, Nationwide, Lloyds, RBS or HSBC, its branches will be
open seven days a week, from 8am to 8pm on weekdays, 9am to 7pm on
Saturdays, and 10am to 4pm on Sundays.

Savings accounts doubled to

TPF says demand for its deposit
accounts has doubled as people look to alternative providers and
away from the crisis-stricken traditional banking sector. A
spokesperson told RBI: “The number of savings accounts has
doubled over the past six months and we now have around 500,000
savings customers. We opened more new savings accounts in December
2008 than in the whole of 2007.”

Each branch will offer the existing range of
TPF products such as insurance, credit cards and savings accounts,
alongside banks of ATMs and a computer terminal
for price comparison purposes ( is the
ninth-largest banking aggregator site in the UK with a 2.3 percent
market share, see Simply no
). TPF has 2,700 ATMs situated across Tesco’s
2,115 UK stores running on average 25 million transactions per

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One of the few products not being looked at
initially is mortgages.

The spokesperson said: “We have aspirations to
launch new products and services including currents accounts within
the next two years and are committed to building our financial
expertise within Tesco stores.”

They added that TPF will be looking to cross
sell retail banking products against the 13 million people
subscribed to Tesco’s Clubcard rewards scheme, said to be the
world’s largest loyalty programme. “We will look to reward customer
loyalty with Clubcard points as we develop our financial services

The total UK financial services profit pool,
states Tesco, is worth up to £20 billion and TPF’s current product
offering has material market positions in only two core categories:
car insurance (a market share of 4.5 percent); and credit cards (7
percent). It says it is the eighth-largest credit card issuer in
the UK.

The spokesperson said: “At the new banking
centres, customers will be able to apply for insurance products,
credit cards, savings and loans. There will also be a private
meeting room for customers to speak to a representative.”

Last month, Tesco announced plans to create
200 new banking jobs. It is also relocating its existing 250
personal finance staff to new headquarters in Scotland. TPF’s CEO,
Benny Higgins, has previously run the UK retail banking divisions
of both Royal Bank of Scotland and Halifax-Bank of Scotland.

TPF may also look at expanding abroad, though
the spokesperson would not comment on any concrete plans. It
already offers selected financial products in Ireland, Poland,
Malaysia (see RHB Bank case study, RBI
) and Slovakia. But parent group Tesco has grocery
chains in 13 countries outside the UK including South Korea (opened
in 1999), Japan (2003), China (2004) and the US (2007).