July 24 2014 Latest news:
Tuesday, June 10, 2014
Britain’s biggest supermarket has taken on the high street’s banking giants as it launches its first current account with a swipe at the “ridiculously poor value” offered by rivals.
Sylvia Waycot, Editor at Moneyfacts.co.uk, said: “The eagerly awaited launch of the Tesco Bank current account has been designed around fair play, it works equally well when you are in credit by paying interest on your balance or applying low charges should you go overdrawn, which is great news as many of us fall into both categories from time to time.
“The account is a best buy for both its credit interest of 3.00pc AER on balances up to £3,000, as well as for overdraft charges of 18.9pc EAR (with no usage fees) on authorised and unauthorised overdrafts. This excellent all-round account also benefits from Tesco Clubcard points and the £5.00 monthly fee is waived if £750 per month is deposited.”
Tesco Bank says it wants to avoid the “smoke and mirrors” such as charges and introductory offers used by others, with an account that offers 3pc interest on balances but will charge a £5 fee unless holders pay in £750 a month.
It will target the six million existing customers who already use its savings, insurance and loans - which include mortgages - but has its parent supermarket’s 16 million Clubcard holders also in its sights.
Chief executive Benny Higgins said it would bring a “fiercely competitive” customer focus from the retail sector which did not exist in banking.
He declined to spell out a target for the number of current account holders or market share it wants to achieve.
But it is thought if it achieved the success of Tesco’s credit card business it would match banking giant HSBC - which together with its First Direct brand has just over nine million UK current account customers, representing a 13pc market share.
Tesco Bank says its share of the credit card market has grown to represent one in eight credit card transactions in the UK, with about £1 billion spent each month.
If its current account numbers were to match HSBC, it would be rubbing shoulders with the big four that dominate personal current accounts, which also include Royal Bank of Scotland, Barclays and Lloyds Banking Group.
A key rival will be TSB, which is being spun off from Lloyds and is also styling itself as a challenger bank - with the aim to grow its current account market share from 4.2pc to 6pc over the next four to five years.
Tesco says its new account offers simple and transparent fees and charges, and that its status as a challenger bank stands up well against rivals because of its scale, full-service offering and independence from bigger lenders.
Mr Higgins said: “It is a market dominated by smoke and mirrors and we have tried to be as transparent as possible. The vast majority of current accounts are languishing with ridiculously poor value.
“There is still very little switching taking place in the UK and it’s because people think that all the banks are the same.”
The current account has been launched with an online focus and offers the prospect of a major personal banking player operating with a minimal branch presence.
Deposits will be able to be made at more than 300 Tesco stores in the same way as they currently are by savers, but the new accounts can only be opened online, though with the option of telephone support.
Debit card spending on the current accounts will offer Clubcard points, both at Tesco and elsewhere. Another feature will aim to help customers to avoid charges with text and email alerts to avoid going into the red.
Tesco chief executive Philip Clarke said: “Customers have told us that in banking they want us to deliver in the same way we do for millions of customers across the UK every day.”
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