THIS WEEK: The currency in Tesco’s banking

Tesco’s move into banking has, some analysts believe, failed to set the world on fire. Compared to the numbers who signed up for Clubcard, the few hundred thousand who have signed up for Clubcard Plus might seem a poor second.

Tesco’s move into banking has, some analysts believe, failed to set the

world on fire. Compared to the numbers who signed up for Clubcard, the

few hundred thousand who have signed up for Clubcard Plus might seem a

poor second.



Yet for most financial institutions, opening that many accounts over

that short a time would be deemed a triumph - especially for a company

with no track record as a financial services retailer.



Tesco will no doubt take time to establish itself in an entirely new

market, but we believe the advantages it enjoys over conventional

clearing banks make it worth the effort for Tesco, for its partner

NatWest, and for its customers.



The big banks - and even the former mutuals who now aim to compete with

them - are still tied to a network of branches which are in all the

wrong places. Where 20 years ago family shopping was done on the high

street, now it’s done at the out-of-town superstore. It’s no longer

convenient to drop into a branch, except during office lunch hours when

many are too crowded to use.



True, the banks have reacted by placing cash machines everywhere, from

tube stations to motorway service areas, but a hole in the wall is not

yet a substitute for a branch, either for the user or for the bank which

wants a retail outlet to sell other financial services.



Tesco has the ability to dispense money at its tills and to carry

information about financial services at any number of locations. It

isn’t too great a leap to see paying-in facilities or foreign exchange

added to the mix to duplicate the most-used facilities of the high

street at the point where they’re needed today.



For banks, the future belongs to telephone and computer banking, and to

partnerships with retailers with the right sites, like Tesco. But only

those prepared to break the reliance on those millstone branch networks

will prosper.