Money insider: Tesco must seize chance to shake-up high street banks

While traditional banks are used to a little competition when new or overseas providers set up stall or a quirky new product is launched by a rival, in the grand scheme of things it's not usually seen as too much to worry about.

Already this year we've seen Metro Bank starting to open branches in the capital, but it's still too early to tell whether this is hurting the more established banking players.



However, there may now be a far bigger threat looming on the horizon as food giant Tesco has just announced that it will begin offering mortgages and current accounts in 2011 once regulatory approval has been granted by the Financial Services Authority (FSA).



A survey earlier this year reported that over 30 per cent of people already have a financial services product from a supermarket.



These will largely consist of insurance, credit cards, personal loans and simple savings accounts all of which are sold via cost effective telephone or internet channels.



The big decision for Tesco is whether it needs a high street branch presence or if installing banking facilities within existing stores will be the best modus operandi as it looks to challenge mainstream banks.



Currently the supermarket giant is trialling a handful of in-store branches to assess suitability and to gauge customer feedback. It could well be that it ends up deploying a mix of standalone outlets and branches within stores as part of its financial services expansion.



Tesco Bank already has over 16 million customers signed up to its Clubcard loyalty scheme, something which will play an important part when it comes to developing new financial products.



The existing range of products are all serious players in the best buy tables, including a market leading 13 month 0 per cent purchases credit card, personal loans at 7.7 per cent APR and an internet saver paying a very respectable 2.60 per cent.



To remain successful when moving to the more complex mortgage and current account markets, Tesco will need simple, transparent and competitively priced offerings. However, if it can successfully incorporate Clubcard rewards as part of the new account packages, this is where it will have a huge advantage over its rivals.



Being rewarded handsomely for brand loyalty is not something that people are accustomed to in the banking arena and could be a real differentiator and one that could help win large numbers of disenchanted customers from high street competitors.



Let's hope that by constantly rewarding customers for their loyalty that the "Supermarket Banks" may force the traditional banks to up their game and specifically the way they treat their customers.



With our banks receiving over 7,000 complaints every day according to latest data from the FSA, there'll be no shortage of customers on the look-out for a new bank account, but only time will tell if Tesco Bank can deliver the first class level of service required if it is serious about becoming a major player in UK banking.



Property perils of latest cuts



homeowners receiving certain income-related benefits are also able to claim Income Support for Mortgage Interest (ISMI) for mortgages of up to a maximum of £200,000, but many are worried that a cut to their benefit may not be the last.



The Government has reduced the interest rate payable on ISMI from 6.08 per cent to 3.63 per cent in line with the latest average mortgage rate as calculated by the Bank of England. While some will still find their interest being covered, others will now find they are faced with a potential shortfall.



This particular change will save the Government a reported £200m per annum. However, there are fears that this state safety net may be cut further as part of the forthcoming Comprehensive Spending Review.



The biggest concern is that the current 13-week qualifying period could be extended and will put additional pressure on both borrowers and lenders. Anyone forced to sell their property would be doing so against a backdrop of falling house prices and tightening of mortgage supply, a worrying combination which could mean far lower forced sale prices being achieved.



Repossession levels are at a two-year low and the latest 2010 forecast of 39,000 is a far cry from the early 1990s, when the figure peaked at in excess of 75,000.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
FIFA President Sepp Blatter reacts during a news conference in Zurich June 1, 2011
news
News
people
Life and Style
food + drink
News
peopleKatie Hopkins criticises River Island's 'seize the day' bags for trying to normalise epilepsy
Arts and Entertainment
Nicole Kidman plays Grace Kelly in the film, which was criticised by Monaco’s royal family
film'I survived it, but I’ll never be the same,' says Arash Amel
Life and Style
Retailers should make good any consumer goods problems that occur within two years
tech(and what to do if you receive it)
Life and Style
healthIf one was missed, vomiting blood was seen as a viable alternative
Life and Style
tech
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

    Guru Careers: C# Project Team Lead

    £55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

    Guru Careers: Graduate Editor / Editorial Assistant

    £16 - 20k: Guru Careers: A Graduate Editor / Editorial Assistant is needed to ...

    Day In a Page

    Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

    Blundering Blair quits as Middle East peace envoy – only Israel will miss him

    For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
    Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

    The Kurdish enclave still resisting the tyranny of Assad and Isis

    In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
    How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

    How I survived Cambodia's Killing Fields

    Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
    Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

    How Stephen Mangan got his range

    Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor
    The ZX Spectrum has been crowd-funded back into play - with some 21st-century tweaks

    The ZX Spectrum is back

    The ZX Spectrum was the original - and for some players, still the best. David Crookes meets the fans who've kept the games' flames lit
    Grace of Monaco film panned: even the screenwriter pours scorn on biopic starring Nicole Kidman

    Even the screenwriter pours scorn on Grace of Monaco biopic

    The critics had a field day after last year's premiere, but the savaging goes on
    Menstrual Hygiene Day: The strange ideas people used to believe about periods

    Menstrual Hygiene Day: The strange ideas people once had about periods

    If one was missed, vomiting blood was seen as a viable alternative
    The best work perks: From free travel cards to making dreams come true (really)

    The quirks of work perks

    From free travel cards to making dreams come true (really)
    Is bridge the latest twee pastime to get hip?

    Is bridge becoming hip?

    The number of young players has trebled in the past year. Gillian Orr discovers if this old game has new tricks
    Long author-lists on research papers are threatening the academic work system

    The rise of 'hyperauthorship'

    Now that academic papers are written by thousands (yes, thousands) of contributors, it's getting hard to tell workers from shirkers
    The rise of Lego Clubs: How toys are helping children struggling with social interaction to build better relationships

    The rise of Lego Clubs

    How toys are helping children struggling with social interaction to build better relationships
    5 best running glasses

    On your marks: 5 best running glasses

    Whether you’re pounding pavements, parks or hill passes, keep your eyes protected in all weathers
    Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

    Please save my husband

    As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada
    Birthplace of Arab Spring in turmoil as angry Tunisians stage massive sit-in over lack of development

    They shall not be moved: jobless protesters bring Tunisia to a halt

    A former North African boom town is wasting away while its unemployed citizens stick steadfastly to their sit-in
    David Hasselhoff's new show 'Hoff the Record': What's it like working with a superstar?

    Hanging with the Hoff

    Working with David Hasselhoff on his new TV series was an education for Ella Smith