British banks have lost the public’s respect over the past year. Could Tesco give the sector the shake-up it so desperately needs?
Bankers are disgusting. Actually, no, they are nice people who have recently behaved in disgusting ways. But their crisis has now become our crisis and consumer trust in the banking community is now at an all-time low. What a perfect moment for Tesco to announce its intent to turn its financial services arm into a fully fledged bank.
Crucially, people trust brands such as Tesco – unlike the banks. And who can blame them? For the past few years, the banks seem to have been gripped by a collective madness that has led to hopeless risks being taken with our money. Poor lending practices have led to massive writedowns.
The big names have lost millions, though it is Joe Public that has paid the price. Yet nearly all the banking leadership remains the same. That’s one of the perks of banking – public scrutiny is weak, even when you are useless at your job.
Enter Tesco, stage left. The retailer has announced ambitious plans to go head-to-head with high street banks following its acquisition of Royal Bank of Scotland’s 50% stake in its joint personal finance business.
Not a moment too soon. Banking needs new skills and it could be the supermarkets that provide them. They are already arguably 10 years ahead of banking in the key areas of transparency and customer service.
The likes of Tesco understand how important it is to be flexible and ready to act. Not so the banks. In a recent report by Sir James Crosby, the former CEO of HBOS predicted the current banking crisis would continue until 2011. It’s hardly proactive to tell people to wait until 2011 for a recovery!
And secondly, the supermarkets understand they are accountable. Again, not so the banks, which were able to make those bad loans because of a distinct lack of transparency as far as communication went.
Banking today is in the state the food sector was a generation ago when people were ignorant about battery chickens, childhood obesity and farmers in developing countries. Since then, pressure groups, the media and government have subjected them to thorough scrutiny on these issues.
The food industry has responded in a positive way. It has learnt to be transparent and to concede on some issues. The consumer now has choice. Any major supermarket today offers what was, 10 years ago, little more than a foodie’s daydream.
There’s no reason to think Tesco cannot now effect the same transformation in the banking world as it has in the supermarket world.
Regulation is supposedly the way to control the banking sector. But a truly customer-focused approach would be better. And who better than the supermarkets to deliver on this front?
Let’s not exaggerate the novelty of the supermarket bank. The Co-op Bank has long sold itself on ethical lending. And there are a number of ethical investment funds. But the banking world has allowed cranky fringe practices to become the mainstream and while it has been the architect of its own downfall, it doesn’t seem to have a clear idea of how to get out of its predicament.
‘Tesco Bank’ could have the answers. There’s also the tantalising prospect of other supermarkets entering the fray. You can’t help but feel that consumers would instinctively trust Waitrose Bank, say, rather more than the traditional banks. n
Jeremy Baker is a visiting lecturer
at London Metropolitan
Business School
Bankers are disgusting. Actually, no, they are nice people who have recently behaved in disgusting ways. But their crisis has now become our crisis and consumer trust in the banking community is now at an all-time low. What a perfect moment for Tesco to announce its intent to turn its financial services arm into a fully fledged bank.
Crucially, people trust brands such as Tesco – unlike the banks. And who can blame them? For the past few years, the banks seem to have been gripped by a collective madness that has led to hopeless risks being taken with our money. Poor lending practices have led to massive writedowns.
The big names have lost millions, though it is Joe Public that has paid the price. Yet nearly all the banking leadership remains the same. That’s one of the perks of banking – public scrutiny is weak, even when you are useless at your job.
Enter Tesco, stage left. The retailer has announced ambitious plans to go head-to-head with high street banks following its acquisition of Royal Bank of Scotland’s 50% stake in its joint personal finance business.
Not a moment too soon. Banking needs new skills and it could be the supermarkets that provide them. They are already arguably 10 years ahead of banking in the key areas of transparency and customer service.
The likes of Tesco understand how important it is to be flexible and ready to act. Not so the banks. In a recent report by Sir James Crosby, the former CEO of HBOS predicted the current banking crisis would continue until 2011. It’s hardly proactive to tell people to wait until 2011 for a recovery!
And secondly, the supermarkets understand they are accountable. Again, not so the banks, which were able to make those bad loans because of a distinct lack of transparency as far as communication went.
Banking today is in the state the food sector was a generation ago when people were ignorant about battery chickens, childhood obesity and farmers in developing countries. Since then, pressure groups, the media and government have subjected them to thorough scrutiny on these issues.
The food industry has responded in a positive way. It has learnt to be transparent and to concede on some issues. The consumer now has choice. Any major supermarket today offers what was, 10 years ago, little more than a foodie’s daydream.
There’s no reason to think Tesco cannot now effect the same transformation in the banking world as it has in the supermarket world.
Regulation is supposedly the way to control the banking sector. But a truly customer-focused approach would be better. And who better than the supermarkets to deliver on this front?
Let’s not exaggerate the novelty of the supermarket bank. The Co-op Bank has long sold itself on ethical lending. And there are a number of ethical investment funds. But the banking world has allowed cranky fringe practices to become the mainstream and while it has been the architect of its own downfall, it doesn’t seem to have a clear idea of how to get out of its predicament.
‘Tesco Bank’ could have the answers. There’s also the tantalising prospect of other supermarkets entering the fray. You can’t help but feel that consumers would instinctively trust Waitrose Bank, say, rather more than the traditional banks. n
Jeremy Baker is a visiting lecturer
at London Metropolitan
Business School
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