The supermarket, which has been trialing the concept in Glasgow since 2006, will use the banks to offer insurance, savings and credit card products from Tesco Personal Finance (TPF).
Tesco is also planning to launch a current account within the next two years while mortgages are also being considered.
It is believed Tesco is looking to take advantage of the current mistrust towards banks following their role in the economic crisis.
The move follows Tesco’s £950m purchase of Royal Bank of Scotland’s 50% share of TPF last year. It is also planning to expand its telecoms operation following the appointment of Tesco marketing director Lance Batchelor as Tesco Telecoms chief executive.
The move to set up a retail bank is the latest in the number of initiatives by Tesco to expand out of its core grocery offering. Some have been more successful than others.
Innovations like its Tesco Direct catalogue has seen it become of the UK's largest retailers of non-food items such as electricals and clothing.
However it sold off its online estate agent Tesco Property Market, which offered to help consumers sell their homes for a flat fee of £199. A holding page for the site still exists, although the enquiries number is inactive.
This article was first published on brandrepublic.com