Since launching in 1997 as a
joint venture with Royal Bank of Scotland, Tesco Bank has acquired
6.5m customer accounts. Tesco Bank’s charismatic CEO Benny Higgins
tells Douglas Blakey the retailer is well placed to take on the
high street banking sector with the launch of current account and
mortgage products.
Go deeper with GlobalData
“I am not saying
Tesco is brilliant, but it is brilliant at what it does.” Reticence
is not a term that one would use to describe Tesco Bank’s CEO.
Benny Higgins is a charismatic leader with great expectations.
Tesco Bank, the UK’s largest
retailer, is “building a bank from scratch”, as Higgins puts it,
but already boast a12% market share in credit cards 21% in pet
insurance – despite a branch network of just six in-store
branches.
Now Tesco Bank is going to
penetrate the UK retail banking market further with its first
mortgage product in the third quarter and a current account slated
to roll out in 2012.
“The banking world will change and
for me, transparency and convenience are the key priorities to
differentiate Tesco Bank,” declares Higgins at a multichannel
roundtable, sponsored by vendors Fiserv and Microsoft.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“I have got very big expectations.
When we launch current accounts, we will be transparent.”
Higgins, one of the UK’s most
celebrated retail bankers, was appointed CEO of Tesco Bank in 2009.
He had previously led the retail banking units of Royal Bank of
Scotland (RBS) and Halifax Bank of Scotland (HBOS).
Having bought out RBS’ 50% stake in
the Tesco Financial Services joint venture for £950m ($1.5bn) in
2008, the unit rebranded as Tesco Bank the following October.
There were challenges, of course –
one of the first and biggest was to find the right IT partner.
Tesco Bank eventually chose Fiserv.
“It was a massive job, one of the
most extreme I have encountered. But now we are close to the
finishing line [to implement the IT platform]. Fiserv’s track
record in such projects was the biggest factor in opting to work
with them.”
Transferring from its existing legacy system
to the Fiserv Signature platform went according to plan during the
weekend of June 18. The bank then experienced what it
described as “an intermittent technical problem” that denied some
savers online access to their accounts the following Monday. Now
resolved, Tesco will press on with its plans to grow its 6.5
million customer base.
“We don’t need current accounts to
be the basis of our customer relationship because we already have
the Tesco Clubcard scheme,” explains Higgins. With 15m Clubcards in
issue, 6.3m of which are regularly used by customers, Tesco Bank
swims in a wealth of customer data.
“The data from the Clubcard scheme
gives us invaluable [insight] into customer behaviour and offers a
fantastic opportunity to serve customers better – there are amazing
marketing opportunities,” says Higgins.
“Offering a current account will
however give us market credibility. We already have the in-store
footfall – 20m customer visits to our stores every week. The
question is: How do we serve customers when they’re in the store?
This is a challenge we need to meet,” he acknowledges. But he has a
solution:
“85% of our products are sold
online; online is the future – and is massively important. We are
an online bank.”
Customers can expect to see
switching incentives to tempt them away from high street lenders,
but Higgins is reluctant to say how many Clubcard points might be
offered to switchers.
“Currently, around one in three
bank account switchers in the UK would not recommend their bank. I
do hope that we can find a way to improve these statistics.”
On pricing, Higgins is
unequivocal.
“The strategy of some of the high
street banks to gain market share has been crazy. This is not our
strategy. Nor will we use mortgage brokers in an attempt to win
market share.
“We are setting up a product
architecture to serve customers well. We want Tesco to create a
large-scale product strategy, but if in two or three years’ time
the mortgages market is bad, we will stop offering mortgages.”
As for Tesco’s high street rivals,
Higgins says he does not waste time thinking about them.
“I think about how we can enhance
our service and our client relationships.”
For the 12 months to 26 February,
Tesco Bank posted a trading profit of £264m, increased revenues by
6.9% to £919m and has a Core Tier 1 capital ratio of 15.9%.
Customer numbers in active credit
cards grew by 11%, personal loans by 17%.
Tesco said its bad debt position
“has significantly improved year-on-year, with the charge to the
income statement 26% lower”.
Tesco’s fixed rate saver product significantly exceeded
expectations and ended the year with a balance of £397m, 40% higher
than targeted.
