launch a high-profile advertising and mailshot campaign to tell its 20m customers that it wants to be their bank of choice as well as their favourite supermarket.
It will be trying to get its shoppers to sign up to its new savings account as it seeks to expand its 6.3m account base. Sir Terry Leahy has promised to build a “people’s bank” by capitalising on public disillusionment with traditional lenders. Next year it will expand its offering to mortgages and current accounts.
Whilst no one underestimates the infrastructure requirements (putting together regulatory teams, risk teams, compliance teams) necessary to operate as a trustworthy bank, Tesco has been helped by the fact that the global financial crisis has caused competing banks to level the playing field via a series of own-goals that have destroyed any residual trust by the public in financial service providers and banks in particular. Moreover, the savvy consumer is becoming more financially astute, and can appreciate the fact that banks charging 4 per cent for a fixed-rate mortgage when Bank of England base rate is 0.5 per cent and they pay just 0.23 per cent on consumer savings is a major abuse of power. This has to provide a major window for Tesco in the sector.
In these circumstances, Tesco simply has to build and maintain a financial competitive-edge ( i.e. offer slightly better rates, and gradually improve these rates as traditional banks are forced to follow, in their efforts to recover inevitable loss of share to Tesco). The rest is a no-brainer in terms of the provision of levels of personal service that will easily differentiate Tesco from any retail bank in the country…
However, the real challenge for Tesco will be to manage consumer expectation by growing their banking service slowly rather than at high speed (i.e. resist 'knock-out' interest rates).This opportunity will continue to be available as long as traditional banks remain in denial, and patently out-of-touch with customer-need.