Tesco assault on banking market on hold as it delays launch of current accounts
Tesco has delayed its assault on the banking sector by putting back the launch of its current account – a cornerstone of its financial services push – until 2013.
The supermarket giant is keen to break the banking dominance of Lloyds, Barclays, RBS, HSBC, and Santander, who together control upwards of 80 per cent of UK current accounts.
But a Tesco Bank current account to rival those of the 'Big Five' will remain in the pipeline for a little longer than planned.
Big plans: The supermarket giant has delayed its challenge to the big five UK banks until 2013 when it will launch into the current account market
Chief executive Benny Higgins told The Times the bank is not ready to launch and will wait until a new industry-wide switching service is in place.
The new free 'redirection service',
which is being set up by Payments Council under recommendation from the
government-backed Independent Commission on Banking, should help smooth potential niggles.
The
Payments Council must have a new model in place by September 2013. It
will ensure seven-day switching and no-fuss transfer of direct debits.
'Getting it absolutely right at launch is more important than rushing it,' Mr Higgins said.
Tesco Bank's computer systems crashed disastrously last year when it tried to migrate customers from former partner Royal Bank of Scotland.
Angry savers threatened a mass exodus after a glitch locked their savings accounts for three days, leaving some unable to pay bills.
Tesco Bank has already attracted 6.5million customers since its launch in 2007 with its insurance, credit card and savings products. It will launch a mortgage product within the next few months. A cash Isa will also hit the shelves, but not in time to beat the 6 April tax-year deadline, according to The Times.
Tesco's existing financial muscle could give it pole position in the battle for current accounts, which has just started to hot up.
It is the UK's biggest supermarket and has an instantly recognisable brand. It also has the option of introducing in-store banking facilities and exploiting its popular Clubcard points scheme, used by 16million people, to attract its hordes of weekly shoppers.
The Independent Commission on Banking, set up to investigate an industry deemed uncompetitive, wants stronger rivals for the likes of state-backed Lloyds and RBS.
Kevin Mountford, head of banking at comparison site Moneysupermarket.com, says along with Virgin Money and The Co-operative Bank, Tesco has the ability to shake-up a stale banking world. Currently just one in twenty Britons switches to a new bank each year.
He says: 'We have been waiting with bated breath for some time for Tesco and Virgin to launch their current accounts, which would freshen up the sector. It would be good for consumers.'
Sir Richard Branson's Virgin snapped up part of Northern Rock's business for 747million in November, including 75 branches and a 14billion mortgage book.
The Co-op, meanwhile, is first in line to win the auction for 632 Lloyds Banking Group branches being sold off under instruction from the European Commission. That would give it more than 6 per cent of the current account market, seen by the ICB as the minimum needed to be an effective challenger.
Other aspiring rivals include Metro Bank, which became the first start-up to launch on Britain's high streets in 2010 and now has nine branches within the capital, and shell company NBNK, which lost out to Co-op in the race for the Lloyds branches.