After Marks and Spencer, TSB and the Post Office, Tesco Bank is the fourth bank to launch new current accounts this year in a bid to win new banking customers. Current accounts have become a major battlefield for banks that aim to win a bigger share of the overall retail financial products market.
The account is Tesco’s first venture into the current account market, besides its existing range of banking and insurance products.
Tesco Challenges High Street Rivals
Tesco Bank claims that the new current accounts will bring fierce competition back to a market offering “ridiculously poor value” to customers. Tesco Bank’s boss, Benny Higgins said that Tesco’s new foray would challenge the dominance of the ‘big four’ – RBS, Lloyds, HSBC and Barclays – despite having only a minimal branch presence.
The bank capitalises on its transparency proposition to set itself apart from mainstream competitors who have received a public backlash for mis-selling in the wake of the financial crisis. Mr Higgins said: "It is a market dominated by smoke and mirrors and we have tried to be as transparent as possible…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 Bank’s CEO also said that the new venture would bring a "fiercely competitive" customer focus from the retail sector which did not exist in banking.
The retailer aims to capture market share mainly from the six million existing customers who already use its savings, insurance and loans but also from its parent supermarket’s 16 million Clubcard holders.
According to Tesco, the account could only be opened and managed online but there will be telephone support. Deposits can be made at 300 Tesco stores.
The key features of the account, as given by www.moneysavingexpert.com include:
No fee if you deposit more than £750 per month. However, there’s a £5 monthly fee if you deposit less than £750/month.
No switching bonus.
It pays 3% AER on balances of up to £3,000. It doesn’t pay interest on balances above £3,000. This is an ongoing deal, not an introductory offer.
Customers get one Clubcard point for every £4 spent in Tesco using their Visa Debit card, and one point for every £8 spent outside Tesco. One point’s worth 1p if used for in-store shopping at Tesco, or you can normally get two, three or four times the value on your points by converting vouchers into Clubcard Boost Partner tokens for experiences, restaurants and more. See our Reclaim Tesco Vouchers guide for more info.
Direct debits and standing orders
You don’t need to set up direct debits or standing orders.
It has an arranged overdraft fee of 18.9% EAR. Unarranged overdrafts cost £5/transaction, up to a maximum of £50/month. You’ll automatically receive a text message and email to tell you to pay in funds if you’re in your overdraft. You won’t be charged if you make a sufficient deposit or transfer before 5pm on that day.
All in all, Tesco promises to deliver the same customer service standards in banking as it does in the retail sector for millions of customers across the UK. The British retailer intelligently taps into their large customer bases to offer banking services and shopping under the convenience of one roof. Another key selling point of the new product is the bank’s simple and transparent approach, which targets customers who are fed up with excessive bank charges and shoddy service of high street banks.
This venture is welcomed into a market that is in demand of a new innovative bank. With so many desperate customers struggling financial, Tesco seems to provide what is needed in terms of attractive overdraft and interest rates, plus loyalty card points.