Tesco Bank has announced it will close all of its current accounts because most customers are no longer using them. The bank has estimated only 12% of its current accounts are being used by customers as their primary account.
Tesco Bank calls time as it closes current accounts
Tesco said most had “limited activity” and others were being used for “other purposes, such as a savings pot”. The decision comes after the bank reported a £175 million loss in April, compared with a £193 million profit in the previous 12 months.
The bank said all of its 213,000 personal current accounts would cease to exist on 30 November. It had closed its current accounts to new business in December 2019.
Customers will receive a letter in the next two weeks to inform them of their accounts closing, the bank said.
Gerry Mallon, chief executive of Tesco Bank, said the bank would support customers to find “a suitable alternative dependent on their circumstances”.
Options include customers moving to a new current account provider via the Current Account Switching Service (CASS) or moving their balance to a Tesco Bank savings account.
The bank said it had asked customers who choose not to switch to a new current account to move any regular incoming or outgoing payments to a different account, and to make sure their account has a balance of zero by 30 November.
“The way customers shop and manage their money is constantly evolving and we are committed to developing products and services which align with the needs of Tesco shoppers,” said Mr Mallon.
“With so few of our current account customers using it as their primary account we want to support them to find a suitable alternative dependent on their circumstances. We will pay particular attention to supporting any vulnerable customers and those in need of financial assistance.”
Supermarkets – with their ready-made branch networks – were once seen as the main challengers to the dominance of High Street banks.
They saw themselves as destinations for much more than groceries, and that included financial services.
That vision was blurred by stricter regulation, the decreasing importance of branches to digitally-served customers, and the emergence of agile, new app-based banks.
Banks want people to hold their primary current account with them. Not least, because they can make money when customers go overdrawn. The incentives they offer for switching a primary account make that obvious.
That was rare for Tesco Bank customers, so it is scrapping these accounts. Digital challenger banks are trying hard to clear the same hurdle, in an attempt to finally break the stranglehold of the big High Street banking brands.
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