Post Office to offer current accounts

A new competitor for Britain’s high street banks.

New Statesman
Photograph: Getty Images.

Post Office Ltd, a wholly owned subsidiary of Royal Mail Holdings, will offer current accounts in its nearly 12,000 branches across the UK in an effort to widen its presence in financial services area.

The service will be initially rolled out in a small number of branches this spring in partnership with the Bank of Ireland.

The 370-year-old high street network, which is undergoing a £1.34bn modernisation programme, is planning to provide current account products in all its 11,800 outlets by the end of 2014. The move would help Post Office to reach more customers as banking giants like RBS and Barclays lost investor trust in the recent times.

Regulators are planning to introduce new rules in September 2013 to make it easier for customers to switch from one account to another.

London-based Metro Bank and retail giant Marks and Spencer (M&S) have launched their banking services, including fee-charging current accounts, in summer 2012. Meanwhile, Virgin Money and Tesco are also planning to provide current account products.

As part of the up gradation programme, small branches like a newsagent or village shop may have traditional counters replaced with service at the checkout. Around half of the remaining branch network is due to be refurbished and will offer extended opening hours to customers.

Post Office, which recently included a pilot scheme for mortgage specialists, is also in discussions with police about whether to open mini police counters as the service closes its front counters in order to meet government austerity targets.

Nick Kennett, director of financial services at Post Office said that the move to provide current accounts was part of a significant transformation to provide more services. “The introduction of the current account is a further statement of this ambition,” Kennett said.

Gary Greenwood, banking analyst at Shore Capital, told the Financial Times that the Post Office would have an advantage over rivals because of its existing branch size. However he noted that the current account market was notoriously “sticky” and that customers will often only move for an incentive.

For the six months ended 23 September 2012, the Post Office posted a £5m rise in profit. The increase, however, was more than accounted for by a rise in government subsidy. Since 2000 more than 6,500 Post Office branches were closed due to fall of customers.

Bank of Ireland currently offers savings accounts, insurance products, credit cards and mortgages through the Post Office.