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Boots considers expansion into personal banking

Boots may follow Tesco with a move into personal finance and banking.

According to a report in the Financial Times, the Alliance Boots group is seeking new areas of business that will increase sales across its network of 2,600 UK retail outlets.

The executive chairman of the privately-owned company, Stefano Pessina, told the newspaper that the business needs to offer customers new services.

He added that certain ideas are under discussion, including a move into personal banking.

Meanwhile, Tesco is proposing to open bank branches in 30 of its stores, by the end of this year.

The supermarket giant first indicated its ambitions in the banking sector last year, after it became sole owner of Tesco Personal Finance (previously a 50/50 joint venture with Royal Bank of Scotland).

The unit already offers credit cards plus savings and insurance products and initially the new banking arm will focus on these areas of the market.

However, the retailer has plans to launch a current account in late 2010 and possibly expand into mortgages in the years ahead.

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One Response to Boots considers expansion into personal banking

  1. Consumer confidence in financial institutions is already at a low but add to the mix growing competition from trusted, big brand retailers, such as Tesco and Boots, and customers could finally have a reason to switch banking providers. Add the benefit of zero toxic debts and these retailers have the advantage of offering more favourable rates, which according to a recent survey by Callata├┐ & Wouters, was the number one demand from respondents (46%) seeking improved services from banks. However, the lack of liquidity within the banking sector is currently preventing financial institutions from offering better rates. The answer to this dilemma could be online banking, which appears to be gaining momentum in the current climate. The direct savings banking model in particular allows customers to be self-directed, meaning banks can minimise overheads during these tough times whilst passing on considerable incentives to customers, such as more competitive rates. Crucially, competitive rates also attract further funds through interbank lending. However, banks can only offer these rates if they have smaller margins, which is made possible through a cost efficient model.

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