The rapid expansion of the banking unit of the UK’s
biggest retailer, Tesco, gathers pace. The company recently gave an
upbeat presentation to analysts and has selected Fiserv to supply
its core banking platform. Douglas
Blakey spoke to Carol Cowan, vice-president of product
management and marketing, bank solutions at Fiserv.
Tesco, the UK’s largest retailer and the world’s third, has
awarded the contract to run its ambitious new banking platform to
the world’s largest fintech player, Fiserv (see Fiserv, IBM lead 2009 fintech
After a lengthy and keenly fought evaluation
process, Fiserv was selected as the bank’s principle IT partner due
to a track record of successful implementations in markets around
the world, according to the retailer.
The recently rebranded Tesco Bank, which
already has around 6 million customers in the UK and plans to have
30 in-store branches – though around 60 percent of distribution
takes place online – has also further outlined plans to take on the
established UK banking community. In a presentation to analysts on
20 November, Tesco said its financial services division, which
incorporates banking, insurance and telecoms, would seek to more
than double its annual profit to £1 billion ($1.7 billion) over the
next few years.
At the heart of Tesco’s banking ambitions to
grow customer numbers and increase cross-sell is the potential
goldmine of its hugely successful Clubcard loyalty scheme, boasting
more than 15 million active members. In the presentation, Tesco
said its banking arm has seen credit card numbers growing at an
annual rate of around 10 percent, personal loans increasing by 19
percent and savings accounts up 28 percent. Transactions at its
travel money business have more than doubled this year.
Release of details of Tesco Bank’s current
cross-sell statistics flagged-up the potential scope for growing
customer numbers: only 10 percent of Clubcard-holders currently
hold a Tesco credit card, 4.2 percent have Tesco car insurance and
a mere 2.2 percent have signed up for a Tesco savings product.
The retailer said it believes by focusing
initially on its loyalty club members it can quickly scale up its
banking unit as the customers are already visiting its stores and
will be cheaper to sign up to its expanding range of banking
While Tesco continues to be linked with moves
to buy up banking assets set to come to market from Northern Rock,
Lloyds Banking Group and Royal Bank of Scotland as part of the
bailed out banks settlements with the European Union (see RBI
622), Tesco Bank’s chief executive, Benny Higgins, insisted
the main focus would be on organic growth.
The bank is pressing ahead with plans to
introduce a current account in the next two years, but commercial
director David McCreadie told analysts it would take time to
develop the right product, while its mooted expansion into
mortgages would require the development of a broader source of
RBI spoke to Carol Cowan,
vice-president of product management and marketing, bank solutions
at Fiserv, about the Tesco core banking platform deal.
RBI: Can you say
something about the selection process involved?
CC: Fiserv and Tesco teams first
talked about a year ago in London and we were then invited to the
request for proposal process.
We can’t disclose the other participants, of
course, but we assembled a cross-Fiserv team, spent the first part
of the process listening so we shared their vision, and then
presented the best platform architecture to scale with their plans,
with multiple products that will be the basis of services they have
in their future strategy.
The ability for us to handle the migration
from their current platform to an end-to-end customised solution,
integrate multiple services and access points, deliver quickly in
an agile fashion and, long term, help them scale as they built
data-driven relationships with each customer, were the critical
factors in the decision.
RBI: Would it be fair to
say that this deal represents one of the more keenly sought banking
IT deals this year in Europe and that Fiserv is particularly
pleased to have won this deal?
CC: Certainly. Tesco is one of the
most admired brands on the planet and Tesco Bank already has 6
million customers, so the opportunities for innovation, integration
and scale for a financial services technology leader such as
Fiserv, is very exciting. This has also been a One Fiserv team
approach, with many business units and experts working together to
build the ideal solution, so the win is that much more
RBI: What was it about
the Fiserv platform which appealed to Tesco and swung the contract
CC: End-to-end, ability to integrate
multiple solutions, proven experience as a number of the products
are best in category with a track record of implementation on a
large scale, and the ability to leverage business intelligence to
build relationships with customers over time. It was a thorough
process and we were able to demonstrate we had actually done this
before rather than just talking to our capabilities.
RBI: Can you summarise
the extent of the contract – what is Fiserv supplying to Tesco?
CC: The Tesco Bank architecture will
be based on the Signature from Fiserv platform, primarily for
retail banking including savings accounts. The additional products
we cannot disclose as they are integral to the Tesco strategy, but
watch this space as products and services are brought to
RBI: What timescale are
we taking about for implementation?
CC: Implementation will be phased
over the next year with Tesco Bank driving specific deadlines based
on their strategy. Any announcements about availability of new
products or services will be made by Tesco Bank.
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