LONDON: Tesco Bank, the financial services arm of Britain’s biggest retailer, has launched its first personal current or checking account, looking to challenge established lenders and bring shoppers back into its parent’s stores.
The bank is aiming for a slice of a market dominated by Lloyds Banking Group, Royal Bank of Scotland, Barclays, HSBC and Santander UK (part of Spain’s Santander ), who provide over three-quarters of accounts.
Parent Tesco also hopes the service will help entice customers back into its supermarkets after suffering its worst three-monthly sales drop in 40 years.
Account holders will be offered credits via Tesco’s loyalty scheme Clubcard, which they can spend inside Tesco’s 3,000 UK outlets. “The bank is a cornerstone of Tesco’s relationship with its customers and (the new account) will make that relationship stronger,” Tesco Bank Chief Executive Benny Higgins told reporters.
Lawmakers and regulators are keen for challengers to emerge to break the dominance of Britain’s “Big 5” lenders and last year introduced rules to guarantee customers can switch bank accounts within seven working days. Higgins said the potential for growth was illustrated by the progress of Tesco Bank’s credit card, which has built up a 12 percent share of the market in the UK. If that was replicated in current accounts, it would give Tesco the same share as HSBC.
Tesco is offering interest of 3 percent on balances of up to £3,000. Customers depositing less than £750 a month into the account will have to pay a £5 monthly fee.
The success of Tesco’s credit cards and other financial products such as mortgages have also boosted spending in stores.
Clubcard points worth £120m were granted to Tesco Bank customers last year.
Current account customers will get 1 Clubcard point (worth 1 penny) for each £4 spent in Tesco and 1 point for each £8 spent elsewhere.
Britain’s personal current account market has become increasingly competitive, with Nationwide and TSB setting aggressive targets for growth, and Santander UK also picking up market share through its heavily advertised 123 current account.
Current accounts are seen as key because they enable banks to cross-sell other products.
Reuters
