The nationalised bank is one of the few financial institutions that has a 100 per cent guarantee on customers’ savings, as it is now Government-backed.
The rush to open savings accounts has led to Northern Rock having to withdraw several savings deals to ensure that it does not abuse any competitive advantage. The bank is one of the few places consumers can trust to keep their money safe, yet if the doors are closed to them, they will be frantically looking for alternatives.
The ever-increasing worry in the banking market has sparked grocer Tesco to once again think about its brand position in consumers’ minds. Earlier this week, Tesco’s banking boss Andrew Higginson said the grocer would move into offering current accounts and mortgages as part of its Tesco Personal Finance package. And in today’s climate, shoppers will be more likely to trust the shop where they get their weekly groceries than a bank whose name is splashed in the newspapers every day for all the wrong reasons.
Yet while current accounts and mortgages may be some way off, Tesco has wasted no time in promoting its existing banking offers. Yesterday Tesco increased its savings account rate to 6.5 per cent, making it one of the most competitive in the market.
The account is flexible too, which is essential in the current climate. Customers can make unlimited withdrawals without penalty and, if shoppers open an account before November 12 and have a balance of at least£1,000 on November 30, they will receive up to 2,000 points on their Tesco Clubcard.
We all know Tesco is a savvy retailer, but its ability to react to the market is unique. If customers are looking for a brand they trust in any different sector, Tesco will strive to offer it. It may not be able to offer everything, but it will try its best.
The offers on the savings rate will be just the beginning. Tesco will pull out all the stops to grow its banking arm to give its customers as many options as possible.
And if the climate gets tougher still, we could well see Tesco starting to offer customers loans for money to be spent in its stores. Its Clubcard is already a huge part of its overall offer, but allowing customers to spend its own money in its stores could move it into yet another lucrative area.
Not everything Tesco tries will be a success, but it could really make a dent in banking. And if the other grocers – most of which are squeezing margins with food price cuts – want to explore alternative growth areas, they’d be well placed to follow suit.
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