BRITAIN’S banking market needs to be made more transparent in order for it to become truly competitive and give smaller banks a chance to woo customers on equal terms with the established big players, according to Tesco Bank chief Benny Higgins.
He said that if consumers could properly compare the accounts on offer they may finally start changing banks in large numbers.
But he added that the so-called “challenger banks” need to live up to their name and offer more customer-focused products.
“People talk generally about challenger banks, but who’s challenging what? If a so-called challenger behaves like an incumbent then the status quo will be undisturbed,” he said.
More than five years after gaining its independence from its early partner Royal Bank of Scotland, Tesco entered the fray by launching a current account this summer and Higgins said it has been well received.
Tesco isn’t divulging any numbers yet but Higgins said he is “very pleased”. He believes that people will only migrate in large numbers if the process of comparing products is made easier, something he hopes a Competition and Markets Authority (CMA) will help with.
The CMA is consulting on its provisional recommendation to refer the markets for personal current accounts and SME banking for a market investigation, with a decision expected in the next few weeks.
Higgins said that a major barrier to a competitive banking market was removed with the introduction of the free switching service just over a year ago. In its first 12 months, more than 1.2 million people changed banks, up 22 per cent on the previous year.
“It was one of the comparators and that’s been removed, but it’s still very difficult to make comparisons,” said Higgins. “I think things will change.”
Despite having a potential home in thousands of Tesco supermarkets, Higgins categorically ruled out trying to build a traditional branch network.
“We will be digital first, but multi-stream too,” he said.
Higgins insists that he is following the trends set by his customers – he essentially had them design the current account through a series of surveys.
And the established banks have generally been cutting back their networks in recent years, although the need to cut costs after the financial crisis has been as much a factor as the rise of digital.
Last week Lloyds Banking Group, the UK’s biggest retail bank by market share, said it would shrink its estate by about 150 branches in a move that will see 9,000 employees lose their jobs. The British Bankers’ Association (BBA) has calculated that in-branch transactions are falling by 10 per cent a year in the UK.