Post Office financial services ‘Open for Business’
From today (Monday 29 March 2004), financial services products will be available from the Post Office®. The new Post Office® unsecured personal loan is the first product launched by the joint venture between Post Office Ltd and Bank of Ireland and will utilise the Post Office’s® 16,500 branches – one of the largest retail networks in Europe.
In Europe, financial services have been available from post offices for a number of years and have generated substantial revenues for them. Deutsche Postbank, which was set up 10 years ago in Germany recently announced profits of EURO 500million and plans to float 49% of the business for an estimated EURO 2.5billion. La Poste in France generates EURO 3billion in revenues from financial services each year and Bancoposta in Italy currently derives over a third of its revenue from financial services and has 15% of the country’s current account balances.
The Post Office’s® move into core personal finance services, is the brainchild of Post Office® Chief Executive David Mills. Following on from its successful launch into travel services, this further expansion is designed to transform the Post Office® into a major player in the financial services market.
In fact, as the Post Office® has 5,000 more outlets than all of the other banks and building societies combined – the Post Office® will provide stiff competition in the UK market. The Post Office’s® move in personal loans comes at a time when statistics that show that the major high street banks are losing their share of the personal loans market and now account for just around 40% of all new loans taken out compared to 60% market share of loan stock.*
Bank of Ireland, which in the UK operates mainly through Bristol & West plc as well as its own brand branch network, will invest £125 million in to the venture over the next 10 years to provide core infrastructure and start-up costs. The venture is equally owned by the Post Office Ltd and Bank of Ireland with profits split evenly between the two.
The two companies have already proved that they can work well together through their joint venture to provide foreign currency. The Post Office® is currently the market leader in foreign exchange with a 20% market share and over seven million foreign currency transactions last year alone.
David Mills, Chief Executive, Post Office Ltd, said: “Extensive research carried out amongst 20,000 customers clearly indicated a huge demand for financial services from a brand like the Post Office®. We have many distinct advantages over our competitors: we have the largest branch network of any retailer with 29 million customers visiting us each week, and we already handle 27 pence of every pound in circulation in the UK. Perhaps more importantly, we are trusted by our customers who appreciate our commitment to providing straightforward, good value products and services.”
Patrick Waldron, CEO of the joint venture and former Director of Retail Strategy at Bank of Ireland said: “We are very encouraged by the early pilots. Research shows that of those who have taken loans to date, 78% felt that it was ‘very good to see the Post Office offering financial services’. We believe that the partnership between the two companies will develop into a major player in the UK financial services market over the next few years.”
Post Office’s® move into financial services has also been well received by sub- postmasters and customers. The first product, an unsecured personal loan, will be available over the Internet and telephone with product leaflets available in all branches.
As well as point of sale marketing and on-line advertising the Post Office® is supporting the launch with TV advertising starting on April 5th. This is part of the £10m “ant” advertising campaign that started at the beginning of the year.
Post Office® fixed rate unsecured
The personal loan product is a simple and straightforward product with attractive rates of interest. Customers can borrow from £1,000-£25,000 and the rate depends solely on the loan amount, rather than the credit rating of the applicant, The rates, which are the same across the internet and telephone are shown below:
Loan Amount APR
£1,000 14.9%
£3,000 12.5%
£4,000 12.5%
£5,000 8.9%
£7,500 7.9%
£10,000 7.9%
£15,000 7.9%
The majority of customers will receive a response to their application within 10 minutes and there is no upper age limit. Customers can also take two monthly payment holidays a year, if they so wish and can have the money delivered to them by courier the following working day, if they so wish for a fee of £45**.
Post Office® warns that some banks and building societies offer consumers different rates, other than the ones they advertise depending on each individual’s credit scoring. This means that the total average interest on a typical loan with a bank or building society (£5,000, over 5 years at 13.04%***) is £1,660.**** However with a Post Office® personal loan (typical APR of 8.9%), a consumer would only pay £1,180 – a saving of £480.
The Post Office® will also offer one of the most competitively priced payment protection insurances available. Unlike many lenders, the Post Office® will not charge interest on the insurance premiums and, as a result its product is 46% cheaper than the market average at just £3.11 per month per £1,000 borrowed – saving £807 on a loan of £5000 over 5 years.*****
Post Office Ltd
Post Office Ltd is one of the three arms that make up the Royal Mail Group, along with Royal Mail and Parcelforce Worldwide. It sells a range of around 170 products and services and undertakes 2.7 billion transactions each year. More than 500 million household bills are paid over Post Office® counters each year and over a million travel insurance policies are sold.
