UK retailer Tesco is to move into mortgage sales and extend its online banking capabilities to benefit from cross-sales and low customer acquisition costs from its popular home shopping service.
Tesco Personal Finance, the banking arm operated by Royal Bank of Scotland, has entered the home loan market by offering customers a three-year discount mortgage, at a competitive rate of 4.75%. Information on the product will be available at 700 Tesco stores and customers will be able to apply by phone or online.
Alistair Smillie, head of Tesco Mortgages, says: "By applying Tesco value and pricing, we believe homebuyers will now have a real money-saving alternative to many of the over-complicated products offered elsewhere."
Tesco's personal finance division was launched in 1997 and has more than 4.2m customer accounts.
In an interview with the Financial Times, Iain Clink, CEO at TFP says the retailer intends to expand its virtual banking operation to cash in on its popular online shopping service.
"It is our link with the Tesco Web site that gives us a big advantage – as it attracts more customers so will we," he told the paper. "And more importantly, the virtual supermarket, through brand loyalty and customer traffic, will have even lower customer acquisition costs than the real supermarket.
"We have shown that the cross-selling works in the physical supermarkets sector – most of our financial customers have come to us from picking up leaflets in stores. Now that is working with the Internet as well."
The company says one in 10 visitors to its Web site look at its financial pages.