Tesco, the UK’s largest retailer, is challenging Britain’s big banks.
The supermarket chain already offers various financial services – such as credit cards and mortgages – but has now launched its first personal current account.
Tesco is looking to build on its success with credit cards where it has a 12 percent share of the UK market.
The company is also hoping this will help entice customers back into its stores countering slipping sales. It has just suffered its worst three-monthly sales drop in 40 years.
The British government is keen for challengers to emerge to break the dominance of Britain’s ‘Big Five’ – Lloyds, RBS, Barclays, HSBC and Santander UK – which provide over three-quarters of accounts.
“We want Britain’s consumers and businesses to have far greater choice in banking services,” said Economic Secretary Andrea Leadsom. “New banking providers will give people more choice and encourage all banks to offer better and competitive services.”
Two other big retailers – Marks & Spencer and Sainsbury’s do have banking arms – but Tesco’s plans are the most ambitious with a wholly owned lender offering a full range of services.
Current accounts are seen as key because they enable banks to cross-sell other products. However Tesco says it has not set long-term targets for growth and played down the impact this bank could have on the overall market, pointing out that bank customers in the UK were still reluctant to switch between lenders.
However, Britain’s Payments Council said in April there had been a 14 percent increase in the number of customers moving banks since new switching rules were introduced last September.
The rules guarantee customers can switch bank accounts within seven working days.