THE Post Office today announced it was entering the financial services market with the launch of a personal loan.
The move is part of a joint venture with the Bank of Ireland following the introduction of foreign currency services and the sale of travel insurance at Post Office branches.
The loan will be the first financial services product offered by the group, followed by motor insurance this summer and a credit card and savings account within 18 months. The Post Office hopes the move will enable it to capitalise on its brand and 16,500-strong branch network, as well as the 29 million customers who use its branches each week.
Customers will be able to borrow between 1000 and 25,000, with rates ranging from 14.9 per cent for loans of up to 3000, to 7.9 per cent for ones of between 7500 and 15,000.
The group, which is part of Royal Mail, added that the rate was dependent only on the amount someone borrowed and not on their credit rating.
Post Office chief executive David Mills said: "Extensive research carried out among 20,000 customers clearly indicated a huge demand for financial services from a brand like the Post Office. We have the largest branch network of any retailer, with 29 million customers visiting us each week, and we already handle 27p of every 1 in circulation in the UK."
Mr Mills, the former head of retail banking at HSBC and the driving force behind its First Direct telenet bank, said the Post Office has 5000 more outlets than all of the other banks and building societies put together.
"We would be really, really happy if we got 2.5 per cent of the personal finance market and delirious if we got five per cent," he said, adding that the Post Office is to move into the motor insurance market in the near future.
The introduction of ten personal finance products, including a credit card and a range of savings accounts over the next 30 months, is designed to fill a 450 million hole in the Post Office’s 1.2 billion turnover caused by the Department of Work and Pensions’ decision to start paying state benefits directly into bank accounts.
Mr Mills added that financial services were already offered through post offices in Europe, with financial products in France generating revenues of around 2bn a year for La Poste, and accounting for more than a third of revenues at Bancoposta in Italy.
The Post Office’s move into personal loans comes as research from market analyst Datamonitor showed that high street banks are losing their share of the market, and now account for 40 per cent of all new loans taken out, compared with 60 per cent in the past.
Bank of Ireland is to invest 125m into the venture over the next ten years and provide key infrastructure and start-up costs. Profits will be evenly split between the two groups.