Tesco Personal Finance Services
Navigant Consulting, 2008
How Tesco is redefining retail banking
Summary
At a time when the financial services sector is in turmoil, it takes immense vision, courage and commitment to launch a new retail bank. But those are exactly the characteristics Tesco has shown over its plans to launch the UK’s first major new retail bank since the dot-com era.
Tesco Personal Finance was set up ten years ago as a joint venture between the supermarket chain and the Royal Bank of Scotland. Although hugely successful in its own right, Tesco decided that it was time to take the next logical step in its development to become a fully-fledged retail bank in its own right by buying out RBS’ share. However, while Tesco had the brand, customer insight and distribution channels to make the front office a success, it still relied on RBS for its product, processing capability and technology.
Faced with this challenge, Tesco asked Navigant Consulting to help it move from a situation where RBS was both shareholder and supplier to one in which RBS was simply the supplier. Navigant used its financial services experience to structure the arrangement, design the new organisation and operating model, support the negotiation process and carry out operational due diligence on Tesco’s behalf – all within a very short time-frame.
The result was a commercially robust solution which will stand the test of regulation and time. In July 2008 Tesco signed contracts worth £950 million with RBS, establishing TPF as a significant independent player in the retail banking market.
What was the problem/opportunity faced by the client?
The full acquisition of TPF offers Tesco the opportunity to take its banking and insurance arm to a new level. Many other retailers have joint ventures or distribution agreements with financial service providers, but Tesco wants to go further and take full ownership of the bank, potentially offering mortgages and current accounts to customers. Tesco has a vision for how TPF can evolve and develop to redefine mass-market financial services in the UK, using its trusted brand, focus on the customer and reputation for operational efficiency and innovation.
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