LONDON (Reuters) - The Post Office will provide a new competitor to Britain’s established but unpopular high street banks, offering current accounts to customers at its 11,500 branches across the UK from this spring.
The government-owned Post Office said its move to add current accounts - the top prize for British banks looking to broaden sales to customers - to its existing range of money products would turn it into one of Britain’s biggest financial services providers.
It already offers savings accounts, insurance and foreign currency exchange to around 3 million customers and has savings deposits worth about 17 billion pounds.
Britain’s biggest five banks - Lloyds, Barclays, RBS, HSBC and Santander UK - control 83 percent of retail accounts and MPs and regulators are keen for competitors to emerge.
The ‘Big 5’ have been plagued by scandals, ranging from the mis-selling of insurance products and complex hedging products to the fixing of benchmark interest rates, eroding public confidence in the industry.
“Customers want simplicity, transparency and good value for money. We can provide this through the most convenient and accessible retail network in the UK,” Nick Kennett, Director of Financial Services at the Post Office, said in a statement on Thursday.
Consumer group Which? said it welcomed the emergence of challengers that will “increase consumer choice and tackle the unhealthy dominance of the biggest banks”. But other observers doubt the Post Office will be able to make serious inroads into the market.
“It is hard to see how the Post Office is going to differentiate itself,” said Peter Hahn, who teaches finance at London’s Cass Business School.
Metro Bank became the first new high street lender to have emerged in the UK for over 100 years when it opened in 2011.
Britons have traditionally been reluctant to switch accounts because of the perceived aggravation involved in doing so. However, that could change in September when new measures are introduced handing banks a seven-day deadline to switch a customer’s account over to a rival.
British banks compete intensely for current accounts as it gives them a base from which to cross sell other products such as mortgages and loans.
The Post Office, which became independent of the Royal Mail last April and will remain in state hands after the Royal Mail’s planned privatisation, said it would initially launch its current account service in a small number of branches before a wider roll-out in 2014.
It will look to pick up new customers through banks closing branches to cut costs.
According to the Campaign for Community Banking, a lobby group, 900 towns and villages in Britain only have one bank branch left while 1,200 communities have no bank at all.
The Post Office itself has been criticised for closing branches and replacing them with branches within shops. However, it has said the overall size of its network will not be cut.
Other retailers are also expanding into banking, looking to utilise their branch networks. Marks & Spencer is opening branches within its stores, in partnership with HSBC, while Tesco is also set to launch current account services.
Reporting by Matt Scuffham; Editing by Clelia Oziel