The new company will launch Post Office-branded financial services products early in the New Year through the Post Office branch network, via the telephone and website.
The product range will include personal loans, savings accounts, credit cards, personal insurance and mortgages.
Post Office Ltd carried out market research over the past 18 months among 20,000 customers. It says the research indicated a market for financial services products offering a combination of trust, simplicity, reliability, convenience and security – all characteristics it believes is associated with the Post Office Ltd brand.
The joint venture will be owned equally by Post Office Ltd and BOI Group and has an initial term of ten years. Each shareholder will be offered board representation on the other’s board of directors, subject to the relevant corporate governance procedures.
BOI Group will invest £125m, funded from Group internal resources, to provide the core infrastructure and start up costs. The Group will source the product range, which will be distributed through the Post Office network.
Post Office Ltd is part of the Royal Mail Group and has one of Europe’s largest retail networks with more than 16,900 branches. It already operates a joint venture with Bank of Ireland in foreign exchange called First Rate Travel Services. This was established in March 2002 and is the UK’s second largest foreign exchange provider to retail customers.
David Mills, chief executive of Post Office Ltd, says: "Our retail network is larger than all the UK banks and building societies put together, with our branches serving 29 million people. Some 42 million visits are made to our branches each week and 27p in every £1 in circulation passes through a Post Office branch. This extensive network and customer base, coupled with BOI’s expertise in the development and delivery of financial services products, creates a business with very exciting potential.
"Our range of products will have great appeal and I expect Post Office Ltd to become a major provider of personal finance services. This is great news for our customers, as our employees and subpostmasters throughout the UK will be able to offer a much enhanced range of products."
Mike Soden, group chief executive at BOI, says: "This joint venture, combined with our existing personal and business banking operations in the UK, gives BOI a unique level of access to the UK retail financial services market.
"We have developed a very good working relationship with Post Office Ltd and its people and a detailed understanding of the dynamics of its distribution model. First Rate Travel Services generated pre-tax profits of £35m last year and underscores the potential of this venture."
