Supermarket giant Tesco is taking on the might of the high street banks by launching an “own-label” deposit account and credit card via its Clubcard scheme.
The first product will be a co-branded credit card launched with NatWest Bank in two months’ time. A deposit-taking service is also under discussion. The news comes as Tesco reports record pre-tax profits of 675m for the year to the end of February.
Tesco chairman Sir Ian MacLaurin told shareholders that the company will continue to introduce new initiatives to “maintain our forward momentum”.
NatWest marketing director Raoul Pinnell confirms that talks have taken place between NatWest and Tesco to develop a co-branded credit card, but will not confirm whether a final agreement has been signed.
A spokesman for NatWest says the new cards will be price competitive but “price is only one part of the deal. We will offer additional benefits other than price”.
However, a Tesco source says that the scheme is only the first of many planned by the supermarket.
“Tesco has watched the banks and thinks that most are a bunch of clowns,” he says.”Tesco can do a much better job. It has a much stronger customer base than the banks and could offer better services.”
According to the source, Tesco also intends to enter third-party deals outside its relationship with Nat-West to offer execution only sales of PEPs, pensions and life products.
It is understood that the new card will be offered to Clubcard members at a cheaper rate of interest than mainstream credit cards and will include the benefits of Air Miles and Clubcard points.
The card will carry both the Tesco and NatWest names, but it is not known whether it will have its own separate brand name, or which payment system will be used.
Clubcard offers the name, address and information on what is bought. A credit card also offers occupational details and credit data – the attraction for NatWest.
“Clubcard does not offer any data on Tesco customers,” says Pinnell, “a credit card gives much more detailed information.”
The new credit card will be backed by a heavyweight promotional push including a direct mail campaign to the existing Club card database and above-the-line advertising.
A Tesco source says that the company is also negotiating with NatWest to run a co-branded deposit taking service.
“Tesco wants to use a bank partner to develop deposit taking, rather than apply for a deposit-taking licence itself,” he says.
A spokesman for NatWest says: “We are in discussions with Tesco to develop a range of possible financial service products.”
He refuses to say whether deposit taking is included. The deal gives NatWest access to Tesco’s 6 million Clubcard customers.
Tesco would not be the first retailer to offer pensions products – Marks & Spencer developed a similar operation in December 1994.
But the deposit-taking scheme is understood to be the first time a third party has been used for the purpose.
Tesco was the first supermarket chain to launch a loyalty scheme with Clubcard in March last year and was quickly followed by Safeway. Sainsbury’s is still running its scheme on a tactical basis.
In January, Budgens launched a credit card with US credit card issuer Beneficial Bank. Tesco refused to comment on its future plans.
News Analysis, page 21