Tesco have announced plans to offer a current account along with its existing banking products in 2014.
The move will create 300 new jobs and is expected to shake up competition in the current account market by offering more choice to consumers.
A spate of recent banking scandals including the RBS Group’s systems failure and this week’s record £28m fine to Lloyds for creating a “culture of mis-selling” could pave the way for Tesco to begin luring in disgruntled customers.
Despite Tesco’s retail arm losing market share to budget supermarkets such as Aldi and Lidl, and spending this year’s marketing efforts on restoring consumer faith following the horse meat scandal, the opportunity to break up the current account status quo is still clearly there.
Current account switch service
Since the launch of the Current Account Switch Service in September, customers have been able to change their bank accounts without much effort, with their main current account provider completing the switch on their behalf within seven working days.
The chancellor, George Osborne, has welcomed Tesco’s decision to enter the current account market and believes it is a “step towards a more diverse UK banking sector”.
“I want consumers to have as much choice as possible and the only way to do this is to encourage new, challenger banks to enter the market,” Mr Osborne said.
The rise of challenger banks?
Despite Mr Osborne’s positivity, many argue that challenger banks risk adding clutter to an already confusing marketplace unless the new current accounts can offer something different and more rewarding for consumers.
uSwitch personal finance expert, Michael Ossei, believes more needs to be done by banks to win over consumers’ trust, but says that Tesco could potentially start offering customers a one-stop retailer for all their shopping and banking needs.
“Regular shoppers will be hoping for additional benefits linked to the Clubcard scheme, so, regardless of what the rest of the market offers, Tesco is likely to win when it comes to convenience,” he said.
The bank’s main offices will be in Glasgow and Edinburgh, with 240 jobs going to customer service areas and the remaining 58 being recruited for legal, commercial, marketing and risk.
Benny Higgins, chief executive of Tesco Bank, said: “We are making excellent progress towards the launch of our current account next year and the recruitment of these new roles is an important milestone in that process.”