What happened: British Bank Barclays announced that it has completed the acquisition of Tesco Bank (Barclays). Over the past few months, Tesco has announced its intention to part ways with its financial services subsidiary and in February it was announced that Barclays is going to be the buyer. Both companies have now finalised all necessary formalities and the deal is done.
The well-known Tesco Bank brand will continue to exist even though Tesco will no longer own Tesco Bank. Barclays made a deal with Tesco, allowing them to not only keep the brand but also to sell financial products inside Tesco branches for at least the next ten years.
My comment: This announcement concludes Tesco’s journey to own the whole value chain of financial services. Owning and maintaining the bank licence was a big burden for the retailer and likely drove the decision to part ways. Tesco mentioned that even though they are selling Tesco Bank, they are still interested in exploring distributing financial services to their customers. The partnership with Barclays to sell financial securities in Tesco branches underlines this.
Retailers are often described as well positioned to offer financial services. The size of their business, the relevance of loyalty and the repeated purchase behaviour of their customers are the main drivers. That being said, it is not easy for any company to launch financial products but especially retailers often struggle to create a compelling product experience. Just because a retailer has many customers and could offer financial services doesn’t mean they should. The main question, as usual, is what value it creates for their customers. None of us needs ‘just another bank account’.
