Tesco is intending to be a giant within the financial services market. The supermarket chain is looking to expand into retail banking .
For £950m, Tesco is purchasing the 50% stake currently owned by the Royal Bank of Scotland of their joint personal finance business .
One of the first stages of its aggressive push into the financial services sector is the expansion of its market share of products like home insurance .
With an eye on the future, Tesco is contemplating launching bank accounts, in direct competition with all high street banks .
The supermarket giant is going to market financial services products, like insurance, savings accounts and loans, particularly in its outlets in addition to business generated online.
No specific time frame has been mentioned for the launch of its basic current account . However, Tesco is considered to be “well placed” to provide the service. It has ruled out providing mortgages as well as corporate banking. Any plan to offer bank deposit facilities in outlets willl necessitate authorisation from the Financial Services Authority (FSA).
Consumers are presently wishing each pound to stretch as far as possible, so, the time appears to be apt for Tesco’s expansion.
Tesco CEO, Terry Leahy, stated that this expansion is going to present a phenomenal challenge to high street banks as well as insurance service providers. He asserted that financial services are a faster growing market than food presently in the UK and this move would enable the true potential of Tesco’s retailing ability to actualise.
Tesco’s personal finance business has been operational for 11, making a profit of £206m profit in 2006.
Nonetheless, business has been slower recently, with Tesco’s market share of home insurance and savings remaining not so huge.
Tesco Finance Figures:
– 5.5 m customers to date
– 1.3 m credit card accounts, 390,000 savings accounts
– 6.9% share of credit card market
– 2,700 ATMs in Tesco outlets
– 4.3% share of car insurance market
Tesco is seeking to double the profit generated from financial services, telecoms and online sales to £1bn in the medium term.
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