Post Office takes on UK banks with current accounts

* Full roll-out planned for 2014

* Service to be offered at over 11,500 branches

* Lawmakers, regulators pushing for more competition

* Britain's 'big 5' banks dominate current account market

By Matt Scuffham

LONDON, April 11 (Reuters) - The Post Office will provide anew competitor to Britain's established but unpopular highstreet banks, offering current accounts to customers at its11,500 branches across the UK from this spring.

The government-owned Post Office said its move to addcurrent accounts - the top prize for British banks looking tobroaden sales to customers - to its existing range of moneyproducts would turn it into one of Britain's biggest financialservices providers.

It already offers savings accounts, insurance and foreigncurrency exchange to around 3 million customers and has savingsdeposits worth about 17 billion pounds ($26 billion).

Britain's biggest five banks - Lloyds, Barclays, RBS, HSBC and Santander UK -control 83 percent of retail accounts and lawmakers andregulators are keen for competitors to emerge.

The 'Big 5' have been plagued by scandals, ranging from themis-selling of insurance products and complex hedging productsto the fixing of benchmark interest rates, eroding publicconfidence in the industry.

"Customers want simplicity, transparency and good value formoney. We can provide this through the most convenient andaccessible retail network in the UK," Nick Kennett, Director ofFinancial Services at the Post Office, said in a statement onThursday.

Consumer group Which? said it welcomed the emergence ofchallengers that will "increase consumer choice and tackle theunhealthy dominance of the biggest banks". But other observesdoubt the Post Office will be able to make serious inroads intothe market.

"It is hard to see how the Post Office is going todifferentiate itself," said Peter Hahn, who teaches finance atLondon's Cass Business School.

Metro Bank became the first new high street lender to haveemerged in the UK for over 100 years when it opened in 2011.

Britons have traditionally been reluctant to switch accountsbecause of the perceived aggravation involved in doing so.However, that could change in September when new measures areintroduced handing banks a seven-day deadline to switch acustomer's account over to a rival.

British banks compete intensely for current accounts as itgives them a base from which to cross sell other products suchas mortgages and loans.

The Post Office, which became independent of the Royal Maillast April and will remain in state hands after the Royal Mail'splanned privatisation, said it would initially launch itscurrent account service in a small number of branches before awider roll-out in 2014.

It will look to pick up new customers through banks closingbranches to cut costs.

According to the Campaign for Community Banking, a lobbygroup, 900 towns and villages in Britain only have one bankbranch left while 1,200 communities have no bank at all.

The Post Office itself has been criticised for closingbranches and replacing them with branches within shops. However,it has said the overall size of its network will not be cut.

Other retailers are also expanding into banking, looking toutilise their branch networks. Marks & Spencer isopening branches within its stores, in partnership with HSBC, while Tesco is also set to launch currentaccount services.