Tesco is set to hand £700 million to its shareholders following the sale of its banking arm to Barclays, with the deal marking the beginning of a ten-year partnership between the bank and the supermarket giant.

The strategic partnership will see Barclays marketing and distributing Tesco-branded banking products, including credit cards, personal loans, and savings accounts, with Tesco retaining all of its existing insurance and money services activities, including ATMs, travel money and gift cards. 

In all, the transfer of Tesco’s banking services will encompass approximately £8.3 billion in lending balances.

Notably, the deal includes Barclays partnering with Tesco on the supermarket’s flagship Clubcard business, the UK’s largest loyalty programme, with the bank now managing the Clubcard Pay+ accounts, though customers will still be able to pick up points at the till. 

According to Tesco, the plan will combine their own market-leading branding and digital reach with the bank’s financial service expertise and preexisting commercial partnerships.

“We are delighted to be working alongside Barclays to unlock even greater value for Tesco Bank customers,” said Ken Murphy, group CEO of Tesco.

“Through our strategic partnership, customers will have access to new and innovative propositions, while continuing to enjoy the unique benefits of Tesco Clubcard.”

Tesco had previously said that around 2,800 Tesco Bank employees who worked on banking products, including the senior management team, would transfer to Barclays, while shareholders would benefit from the nearly £1 billion in cash the deal will generate in the form of an incremental share buyback.

C.S. Venkatakrishnan, group chief executive of Barclays, said: “This acquisition is an important step in increasing our investment in the UK. We look forward to collaborating with Tesco Group on delivering Tesco-branded financial services. We are delighted to welcome all transferring Tesco Bank employees and customers to Barclays.”

The deal, one of the largest banking buyouts in recent history, was approved by the High Court last month, with the changes coming into effect today.

Recommended

• Barclays to Acquire Tesco’s Retail Banking Business
• UK Treasury: ‘Britcoin’ Digital Pound to Come This Decade
• FinTech Scotland | Innovation, Loyalty, and the Future of Digital Payments

In the lead up to the takeover, Jake Bailey, head of innovation and loyalty at Tesco Bank, spoke at FinTech Festival Scotland, where he made it clear that the supermarket was taking the opportunity to drive forward innovation in the financial sector.

“For years, I’ve been coming up with ideas, with teams of people, of exciting things we want to do, but not having the money to get it done, because the retail business is focused on groceries,” said Bailey.

“So we found a partner who was willing to put some capital behind it and drive innovation with us.”