Following on from yesterday’s thoughts on innovation in the new banks (we’re primarily talking about the 3 forthcoming entrants to the banking market, Tesco, Virgin and Metro Bank), Chris Skinner has posted some interesting slides from a recent Datamonitor event:
The slides look at each of the new entrants and assesses the opportunities and threats they are likely to face.
Here’s a very basic summary, but I suggest you view the slides for more in-depth analysis.
Whilst it’s unlikely to introduce particularly innovative products from day one, Tesco has the benefit of a ready-made branch network – it’s stores – and a massive customer base (15m Clubcard holders, for example) to which it will be able to cross-sell. Customers will be exposed to them on a regular basis, such as on their “weekly big shop”, but Tesco needs to be careful about how it uses the masses of data it stores on its clients, otherwise it could suffer from being seen as “Big Brother”.
Could banking be a step too far for Tesco’s brand?
Datamonitor predicts that within 3 to 5 years Tesco Bank could have 1.5% market share of current accounts, which would put it into the top 10 banks.
Virgin is likely to try to build on its current Money offerings (such as their popular credit card) as well as growing through acquisitions.
Virgin has a strong brand, and are seen as being innovative as well as socially responsible, yet Branson hasn’t always succeeded in all of his ventures (remember Virgin Cola?), and much of its success will depend on how its mergers and acquisitions can grow the business.
As we’ve mentioned before, Metro Banks primary selling point will be its customer service, more so than price – it will provide more of a premium current account. They are only planning to have 200 outlets by 2020 and will focus on “convenience” for their customers, by opening at times they feel that customers want and being able to open accounts within a few minutes of a customers request.
There could be some reservations about Metro Bank’s credentials as they’re American (seen as the banking equivalent of McDonalds, perhaps – “McBank”), and given their focus on London, could struggle to reach the wider UK population.
Datamonitor predicts that Metro Bank could have less than 0.5% of the UK current account market in 5 years time, limited by the number of branches it intends to open in that time.
- Gocompare.com Launches Enhanced Current Account Comparison Service (March 26, 2015)
- One In Eight Brits Will Switch To Digital-Only Bank This Year (April 28, 2015)
- HSBC Launches “Connected Money” App (May 9, 2018)
- Fraud Warning For Bank Customers On Twitter (September 10, 2015)
- B – New Banking Service “Designed By Customers For Customers” (May 4, 2016)