Feb 11, 2015
Tesco Bank to grow current accounts market share
Feb 11, 2015
LONDON, United Kingdom - Retailer Tesco's banking arm plans to grow its share of the personal current account market significantly, bank Chief Executive Benny Higgins said.
Higgins, formerly head of retail banking at RBS, said current accounts could grow to be as big as Tesco's credit card business. Tesco's payment cards are used in one in eight credit card transactions in Britain.
The bank, which also offers savings accounts and mortgages to 7.2 million customers, is aiming for a large slice of a market currently dominated by Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC, which provide over three-quarters of accounts.
"I think that we can aspire to be a significant player but I think the nature of the market means it will take time," Higgins said in an interview.
Tesco bought out RBS's 50 percent share in Tesco Personal Finance for 950 million pounds in 2009 and has expanded the business, culminating in its move into current accounts.
Higgins cautioned though that the business would take time to build given the reluctance of Britons to switch accounts.
"There is more switching in the credit card market so the market itself lends itself to faster growth. I think the current account is going to be a long burner. This is a building block for the very long-term health of the business," Higgins said.
Tesco, whose image has been dented by an accounting scandal and its market share eaten into by discount retailers, recorded its first sales rise since January 2014, data showed on Tuesday.
Higgins said growing the bank would help Tesco re-assert its dominance of the grocery market.
"Tesco has had its challenges but it's an incredibly strong brand, feeding the thick end of 30 percent of the UK population. It's got enormous breadth and depth and reach," he said.
Tesco Bank's account holders are offered credits via Tesco's loyalty scheme Clubcard, which they can spend inside its 3,000 stores. Higgins said customers spend on average 12 percent more in Tesco stores after they become customers of the bank.
British lawmakers want challengers to break the dominance of the country's 'Big Four' banks and the country's competition watchdog is investigating personal current accounts and small business banking services.
Higgins said finding ways to make bank charges more transparent was key to the investigation. But he rejected the idea that big banks should be broken up.
"We don't need more banks. We've got enough banks to provide a very competitive market. The real issue at the very heart of this is a lack of transparency. People really don't know how much they're being charged," he said.
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