The largest grocery retailer in the U.K. – Tesco Plc is to put the retail banking industry in turmoil when it becomes the first supermarket chain that enters competition with high street banks. The company is betting on its reach on a large number of customers and aims to turn them into bank customers by offering them checking accounts with loyalty points and high interest rates.
The Chief Executive Officer of Tesco Bank – Mr. Benny Higgins commented for the Financial Times: “This is the final brick in the wall in the building of our bank.” As reported by BBC, Mr. Higgins also added: “Customers tell us they are very tired of the smoke and mirrors and the need to pay attention to the small print. We are setting out to be very clear and transparent.”
The company decided to launch an online account program that rewards its customers Clubcard points. This move of Tesco Plc is considered able to shake up the personal-banking market in the U.K., because the rivalry to attract new banking customers is considered to become even more fierce than it is at the moment. Tesco Bank started its existence as a joint venture in cooperation with the Royal Bank of Scotland.
Tesco intends to offer extra shopping discounts to the customers, who open an account. This makes it one of the four banks that provide new current accounts in 2014, including Marks and Spencer, TSB and the Post Office.
As reported by BBC, although the company is hoping to attract new customers, Chief Executive Officer Benny Higgins said that he does not expect a sudden rush of customers, but he hopes the account service to become popular “for very many Tesco customers and beyond”.
Currently, Tesco Plc is trying to turn its grocery business in the U.K. Back to profit. The business is considered to generate about 70% of the companys annual sales that amount to 70.89 billion pounds, but it has been facing some difficulties over the last few years, due to the fact customers fled to competitors discount stores. The company was also put under a wave of criticism by both analysts and investors saying that it is searching for expansion into new areas instead of focusing primarily on its core business.
Tesco Plc is now seeking to attract more banking customers, which means it would have to face the rivalry and domination of five larger banks in the U.K., four of which – Royal Bank of Scotland, HSBC, Llouds and Barclays – hold about three-quarters of the 50 million accounts in the country.
Tesco Plc was losing 0.39% to trade at 292.94 pence per share by 8:03 GMT, marking a one year change of -16.3%. According to the information published on the Financial Times, the 18 analysts offering 12-month price targets for Tesco Plc have a median target of 291.00, with a high estimate of 360.00 and a low estimate of 230.00. The median estimate represents a -1.05% decrease from the last price of 294.10.
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