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Tesco's current account: some benefits but no branches, says Jill Treanor

June 10, 2014



At last. Tesco launches its current account this morning after almost four years of delays and prevarication. About pounds 600m has been spent carving out a standalone Tesco bank from Royal Bank of Scotland, which co-owned a banking joint venture that ended just as the financial crisis began. As Benny Higgins, the boss of the supermarket's bank, puts it, the current account "is the final brick in the wall of building the bank".

Except there are not really any bricks. While bank customers can queue at 300 service desks in supermarkets, there is no branch network. Higgins is betting that customers do not need branches, and talks about an "inexorable decline" in branch networks in the years ahead. The incumbents on the high street - Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays - are indeed shutting branches but pledge not to close all doors.

If Higgins is right, he starts with a lower cost base than rivals. A big plus. If he is wrong, he may find it difficult to convince customers to shift to his unproven current account.

The lure is there for Tesco customers. For instance, any of the 16 million Clubcard holders who open an account will get points. For others, the promise of 3% interest is the draw.

The overdraft rate looks high at 15.9% but at least contains no hidden charges, while customers who cannot deposit pounds 750 a month face pounds 5 monthly fees.

Higgins is uncharacteristically shy when it comes to predicting what market share he would like in current accounts. If the bank could replicate the 12% share of the Tesco credit card in the current account market, that would put it on a par with HSBC in the UK. That would be quite an achievement. But let's see - customers tend not to move current accounts in the way they chase hot credit card rates.



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Source: Guardian (UK)


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