4 February 2010 | Published by Datamonitor

Tesco Bank is predicted to creep into the banking top 10 over the next few years, with new kid on the block, Metro Bank, set to make a splash with its fun and kid-friendly banks.

 London, 04 February 2010 – Analysis of the new names entering the financial services market, carried out by leading business intelligence house Datamonitor, reveals that Tesco Bank will take a 1.5% share of the current account market as soon as 2013. With growth in the retail market curbed, Tesco is set to take advantage of the current consumer dissatisfaction with banks, and do for banking what it’s done the grocery sector.

A flurry of new names are eyeing the financial services market as a lucrative opportunity, bargaining on winning big by making banking less boring. Metro Bank is one such company, set to open its first branches in London soon, with opening hours that fit around consumers’ working lives, and offering free dog biscuits for customers with pets to make the branch experience more enjoyable. From a small start, Datamonitor’s Liz Hartley predicts that Metro Bank will win 0.5% market share in the UK current account market by 2015.

Liz Hartley, Principal Consultant for Datamonitor’s Financial Services team, believes that “the new entrants will bring a more dynamic aspect to financial services, using tools learned in the supermarket and fast food sectors to generate real consumer engagement to drive business growth”.  

However, these numbers will not trouble the big banks too much. Despite the banking sector continuing to face scrutiny from all quarters, consumers are by and large not set to defect from their banks en masse. The top five banking groups have over 80% share of the crucial current account market, and the loss of a few percentage points isn’t going to cause them too much lost sleep. For them, it will largely be business as usual.

However, financial institutions could learn a lot about customer service from high street retailers, but Tesco and others certainly won’t have it all their own way. Neil Saunders, Consulting Director for Datamonitor’s retail division Verdict Research, warns that the retail
sector will itself face new challenges in 2010, and that brands must be careful to avoid a ‘tarnished halo’, where difficulties in one part of the business infect other areas, such as customers taking business to another retailer if they are unhappy with their banking experiences. 

Datamonitor thus predicts that the new banks and their customer-friendly businesses will cause a mini banking evolution, not a revolution.

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