More on Tesco, Virgin and Metro Banks

Data Monitor kindly sent me some slides about Tesco, Virgin and Metro Bank after my blog this week.

The slides are part of a series from Data Monitor, Ovum and Verdict Consulting reviewing:

• the new entrants into the banking industry: Tesco, Virgin and Metro Banks;
• the future consumer technologies in banking;
• the consumer’s view of the world; and
• a view of the future.

And were delivered as part of an event for Data Monitor’s clients in January 2010. Slides provided by Data Monitor to the FSClub with thanks.

The opening presentation from Liz Hartley of Data Monitor is particularly interesting in its relationship with my earlier analysis, and here’s a few bullets to give you a flavour:

As we look ahead to where the FS industry will be in 2020, there are many big questions. Today we’d like to focus on three main areas that are not necessarily new, but which face a renaissance and could change the rules of engagement:

• How real is the threat – and opportunity – posed by new entrants to the mainstream FS market?
  
• How will consumers and their technologies change and how should the industry respond?
  
• How should or could FS companies become like retailers?
  

Tesco Bank

• Within 3-5 years of launch, Tesco Bank will have 1.5% market share of current accounts, nudging it into the top 10
  
• Potential for launching a Tesco Finest Current Account – further opportunities to drive value and peripheral products, such as travel insurance
• Increased focus on cross-selling, awareness and incentives will drive GI share in home and motor in particular
  
• Wider product range across cards and savings will be popular – expect debit cards to reach 1m
  
• Complex products, such as mortgages and life insurance will be a difficult sell – appetite, appeal and advice are all required but questioned. We anticipate limited take up.
  

Virgin Bank

• It’s too early to call how much market share they wil win.
• Virgin will buy in market share to significantly increase its ranking, but the size of this will depend very largely on how its M&A plans unfold
  
• Product range will be fuller than existing Virgin Money offering
  
• Expect to see greater share of the cards market through cross-selling
• Greater focus on cross-selling and benefits, e.g. airmiles
  
• Question: will Virgin Bank be around in 2020?
  

Metro Bank

• Growth will be limited by branch numbers – expect less than 0.5% market share of current accounts in 5 years
  
• Aim of 12 branches in 2 years – could expect network to be as large as Northern Rock’s by year 5
  
• Market share won’t really trouble the biggest players – customer losses would each be small, and building societies in the regions are unlikely to be hit
  
• Big name brands are likely to see customer defection – especially those with premier focus
• However, by 2020, things could be very different with 200 branches – expect up to 1.5% share (current equivalent)
  
• Small but perfectly formed – a medium term acquisition target?

I also got some good input from one banking expert this week, who reckons that Virgin will be a 'mortgage bank' like the Abbey and Halifax were a decade ago; and Tesco will be a massive data mining financial warehouse of risk analytics for cross-selling insurances and loans to their Clubcard holders.

Sounds like a good idea to me.