Tesco starts a bank

Wednesday, 07 October 2009 09:20

Tesco has announced its personal finance wing will now be known as Tesco Bank.

Tesco Personal Finance had provided loans, savings, insurance and credit cards online, but the supermarket is now taking a step further.

The firm is already trialling bank-style counters and branches in six stores across the country and further outlets are planned.

Over the next two years, Tesco Bank will also be looking to expand into current accounts and mortgages.

The immediate changes are a signal of Tesco's intent and see a rebranding of the website to Tesco Bank and a new address TescoBank.com.

Kevin Mountford, head of banking at moneysupermarket.com, welcomed the move that could create greater competition as the number of players on the high street has reduced with mergers of Abbey, Alliance & Leicester and Bradford & Bingley under Santander and the merger of HBOS and Lloyds TSB in Lloyds Banking.

"Although the news had been strongly rumoured it is good to hear it formalised," he said.

"In the main the UK banking market has offered a healthy competitive environment; however the last year has seen some major consolidation, which in the long run is likely to affect the level of customer choice."

He added: "The move into bank accounts is also good to see as this is one area that needs to be challenged with greater levels of switching encouraged."

However, there have been concerns raised over how Tesco might encroach into the territory of smaller building societies, just as major supermarkets have hit smaller retailers.

Tesco Personal Finance was established 12 years ago as a joint venture with Royal Bank of Scotland, but the retailer has since bought out its partner in a £950 million deal.

The firm saw its number of customers increase by 300,000 in the last year to six million and recorded a gross profit of £359 million.

• Tags:
• bank accounts
,
• news
,
• online banking