Richard Goold, Executive Director at transformation consultancy Moorhouse, comments on the launch of a current account by supermarket Tesco.
“The move by Tesco to become the first supermarket to launch a current account is no surprise, and an indication of the way the retail banking sector is changing. Recent reports and a series of disappointing financial results have highlighted the struggle for many supermarkets to maintain the levels of growth and expansion they are used to. In light of this, it is inevitable that they will look for other ways to engage and protect their customer base, at a time when competition in the banking sector is being actively encouraged.
“Loyalty schemes offered by supermarket retailers are an ideal platform to tie together a range of services for customers, from banking and mobile phone contracts, through to healthcare services like opticians and pharmacy as well as traditional grocery shopping. They cannot afford to be complacent though. Customers are fickle and unless they are locked-in they can be impatient and switch brand allegiance quickly. Being in a position to offer a competitive and compelling retail banking offering to customers can be a differentiator but there is no room for mistakes, failures or anything other than positive PR.
“Like supermarkets, the financial services sector has seen the emergence of new market entrants and challenger brands. Organisations in the retail banking space have seen newer organisations pick off parts of their service and do it faster, more effectively and offer more competitive rates. To remedy this, the traditional larger banks need to become more agile and responsive to the needs of their customers. This is a tough ask when they are facing so much regulation. They must adopt a new way of managing so much change to innovate and thrive.”