Tesco puts off launch of its current account

The launch has been put back to allow Tesco to take advantage of new rules making it easier for customers to switch banks.

Tesco Bank had previously intended to launch current accounts in the autumn of this year, aiming for a slice of a market dominated by Lloyds, Royal Bank of Scotland, HSBC, Barclays and Santander UK.

Tesco Bank said the launch timing is being driven by the implementation of new industry-wide systems to help customers switch current accounts more easily.

“We are progressing at the right pace in our journey towards offering a full-service bank,” a spokeswoman said.

“We’re close to completing the migration of our existing products and services and will continue to take a cautious approach to launching new products,” she added.

Last year The Independent Commission on Banking recommended that a free current account redirection service is formed to improve the system by which customers can switch bank accounts.

It recommended that the service should be set up by September 2013.

Tesco Bank, which has 6.5 million customers, was launched in 1997 as a joint venture between supermarket giant Tesco and Royal Bank of Scotland.

Tesco acquired the remaining 50 per cent RBS stake in 2008 for £950m and Tesco Bank is now fully owned by Tesco.

Tesco is understood to be planning the launch of its first mortgage product within two months, after the move was also put back, from a start date originally planned last autumn.

A cash Isa product is also planned for this year, but not in time for the end of the tax year in April.

News of the current account delay comes a month after the wider Tesco group issued its first profit warning in living memory following disappointing Christmas sales, sending its shares tumbling.

The company saw billions of pounds wiped from its market value after chief executive Philip Clarke said the supermarket chain had failed to pull in enough customers with its £500m Big Price Drop campaign.

Competition in the banking sector has been one of the main focal points of regulatory change in the last few years.

In December, the Co-operative Bank entered into exclusive discussions with Lloyds Banking Group over the sale of 632 branches.

The branches had to be sold to meet European competition rules.

Last November, Virgin Money bought nationalised bank Northern Rock for £747m, which boasts 75 branches, one million customers and holds £14bn of mortgages.

While Tesco has launched some products, such as a fixed-rate savings account, it has focused largely on setting up its own operations, from IT platforms to call centres, and transferring customers to them.

Some analysts have been disappointed by the time it has taken Tesco to gear up its banking business, arguing it has missed an opportunity to take custom from established players during the financial market crisis and lagged other new entrants, like Virgin Money and Metro Bank.

Tesco Bank already offers insurance, credit cards and savings products.

Milestones on road to a new bank

Tesco Bank has 6.5 million customer accounts across a wide range of products and services.

Its services include insurance for motor, home, pet, travel, dental, health and life.

It also offers credit cards and personal loans, personal saving products, cashpoints and Tesco Compare, an online insurance and utilities comparison site.

Tesco Bank sells its products and services through multiple channels, including in-store, by telephone and online.

In October 2009, Tesco Personal Finance began using the trading name Tesco Bank, in recognition of its longer-term objective of offering Tesco customers new products and services.